Course work: Internationalization strategy of Starbucks in Russia.
Most of the concepts and tools of strategic analysis developed in previous chapters are applicable to the problem of diversifying a company's activities as it enters the broad international arena. However, there are a number of additional variables that must be taken into account when formulating a firm's international strategy. These are discussed in this chapter.
Distinctive characteristics of internationalization
When such a company enters a foreign market, its management expects that it will have to face new competitors and new competitive dynamics. However, success in new markets, in addition to competitive parameters, may equally be determined by a number of factors that remain in the background (and taken for granted) as long as the firm limits its activities to the national market.
One group consists of economic forces. Foreign conditions may differ from national ones in the level of economic development of the respective countries, the volume of the market for the company’s goods, the degree of market saturation, etc.
Another group consists factors related to national culture and way of life. Foreign strategic business zones may differ in consumer tastes, forms of purchasing, distribution of consumer budgets, their ability to use technologically complex goods, etc.
The third group includes political factors. The ideology of the government of another country may differ from the national one. As a result, the attitude towards business changes, as well as the rights, rules and restrictions under which the company must operate.
A combination of economic, cultural and political differences can be as important in a new market as the competitive conditions. A convincing example is the history of the penetration of developed country firms into the Third World market. On the one hand, the huge potential demand in these countries was realized slowly due to the low growth rates of their economies. On the other hand, access to existing demand and ensuring profitability were often limited by the governments of these countries, either committed to Marxist ideology or operating as military dictatorships.
(So, when a firm enters into a risky business abroad, it must obtain much more information than it needs to make business decisions at home.)
A complicating factor is that firms that do not study and analyze the situation in their country in order to identify economic, cultural and socio-political trends do not value such information and do not have the experience of obtaining it.
Recall (Chapters 2.3, 2.4 and 2.5) that when a country's operating environment becomes volatile, firms are forced to develop the ability to monitor the situation. Therefore, firms that have gone through economic-political-technological changes in their country are better prepared to internationalize their activities than firms whose operating conditions have been stable for a long time.
It follows from this that Firms seeking to internationalize and operating in relatively quiet domestic environments need to develop new monitoring and analysis capabilities.
The problem is compounded by the fact that much of the critical information about the foreign situation may be non-quantitative or even inaccessible to foreigners. Such information can only be absorbed by a native or someone who has lived in the country long enough to acquire a sense of the critical but subtle factors of success. The Germans call this ability “touch with the fingertips.” In the future, such important but inexpressible or unquantifiable perceptions will be referred to as “vague information” about foreign strategic management zones.
The above circumstances have a number of strategic consequences.
- In general, foreign penetration is more expensive and takes longer than comparable domestic diversification. Further, the goals that can be achieved by penetrating a foreign market are limited by the nature of the opportunities presented. For example, moving from a developed to a developing demand cycle in another country increases future earnings but does not increase the firm's current profitability. On the contrary, it reduces profitability since more short-term investments are usually required during the demand phase.
Therefore, it is important to determine the goals and objectives that should be achieved as a result of internationalization and make sure that this is the preferred or only path. This issue is addressed in 2.6.2 and 2.6.3.
- Differences between commercial and other success factors, the importance of unclear information, differences in tax systems, income restrictions and foreign exchange barriers - legal requirements that must be met in the country - all these circumstances can force a firm to move beyond the role of an exporter and become a member of a local entrepreneurial community. Section 2.6.4 describes the internationalization process flowchart.
- It is likely that product mix and marketing strategies that were successful in the domestic market may be suboptimal or even unsuccessful in foreign markets. Therefore, it is necessary to determine the position in relation to two extremes: the use of identical strategies in all strategic economic zones and the development of special strategies for each agricultural sector. This issue is addressed in 2.6.5 and 2.6.6.
- When a firm becomes multinational and seeks to balance the advantages of global product development and production with the disadvantages of the difficulties of taking into account local market conditions, it becomes impossible to assign overall authority and responsibility for strategy development to one organizational unit or one manager. In a multinational firm, it becomes necessary to develop a process by which the objectives of regional managers, line managers and division managers can be aligned. This issue is addressed in 2.6.7.
- The high costs of obtaining strategic information about foreign strategic business areas must be taken into account when making profitability assessments and formulating a firm's internationalization strategy. When the opportunity presents itself, the cost of exploring a new national market must be offset by penetration into several agricultural economies, which requires an appropriate country presence strategy. Firms have learned from experience that it is wise to get involved in internationalization gradually, by undertaking low-cost operations first and gaining experience before taking subsequent steps. This means that initial penetration should consist of strategic reconnaissance and be less focused than usual on making quick profits in the new country. This issue is addressed in 2.6.8.
- In conclusion, it should be noted that the leadership qualities required for effective internationalization are different from those required for conducting business only within the country. This is discussed briefly in 2.6.9. A detailed analysis of the requirements for managers will be made in Chapter. 3.3 and 3.4.
Goals of internationalization
Internationalization, like diversification within a national framework, raises the question of the firm's goals: those aspects of activity that the firm seeks to improve through these processes. In both cases, it is important to understand the goals and be confident. What strategic criteria, used to identify and evaluate alternatives, will lead the firm to the SZH, where it can achieve its intended goals. In the absence of goals and criteria, firms often act on the principle “It’s good where we are not,” an approach that is supported by ignorance of the foreign situation. This behavior often leads to unexpected results: the costs of internationalization significantly exceed those planned, and the results of activities do not provide the necessary norm arrived .
The following goals are typically achieved through diversification/internationalization:
- Growth of firm scale/size:
a) support growth and avoid stagnation caused by the saturation of the company’s traditional agricultural products;
b) accelerate the growth that began in the past and is still ongoing;
c) increase the scale/size of the company by expanding its activities to strategic business areas with similar growth prospects.
The wave of penetration of American firms into European markets after the Second World War was caused by goals a) and b). Many American firms had difficulty maintaining long-term growth rates, while others reached market saturation levels (see Chapter 1.1). European markets seemed to represent a "safety valve". This was indeed the case, because Europe was just entering the consumer economy, which in the United States was formed in the 30s.
Currently there is a movement in the opposite direction. Many European firms see the US as an opportunity for growth. For example, European retail firms have acquired consumer goods retailers in the United States. Only goal c) can be achieved through such a move: European firms typically buy businesses that are more sophisticated and mature than comparable retailers in Europe. Instead of buying for growth potential, they are simply looking to increase the size of their operations.
- Increased profitability:
a) increase profitability in the long term by introducing agricultural agricultural enterprises that are in the early stages of development;
b) increase short-term profitability by introducing agricultural enterprises that are currently profitable;
c) increase/maintain short-term profitability through foreign agricultural storage facilities, which provide savings compared to national agricultural agricultural enterprises.
An example of the desire to achieve the first goal is the acquisition of small American firms specializing in genetic engineering by many leading European pharmaceutical companies. A clear example achieving the second goal is Japanese intervention in the lucrative computer market. The third goal is currently being pursued in the increasingly global automobile market by those firms whose national market is no longer sufficient to ensure their competitiveness.
- Balance of the company's strategic set:
a) ensure the continuous profitability/growth of the company in the short and long term by improving the compatibility of demand/technology life cycles. This is a larger goal than previous ones. It usually transforms into one or more of the purposes described above;
b) ensure the company's invulnerability in the future in conditions of technological, economic, socio-political cyclicality, structural shifts and unexpected events. The latter goal forces the firm not to limit its activities to one technology or one country. This has been put forward as a reason for the expansion of French firms into the United States, which seek to reduce the socio-political-economic uncertainty arising in their activities in their own country.
Consideration of the above list of goals shows that most of them can be achieved both through diversification within the national framework and through internationalization. In fact, only the latter goal can be achieved only through internationalization.
That's why, When assessing the prospects for internationalization, it is advisable for a company to compare the possibilities of internationalization and diversification, since each has its own advantages and disadvantages. Diversification within a national framework is associated with the benefits of operating in a familiar socio-political-cultural-economic environment, but entails the risk and costs of developing new areas of activity. Internationalization deals with the benefits of expanding into a familiar area and the disadvantages and risks of operating in a foreign setting.
Goals and strategic criteria
In table 2.6.1 lists the so-called strategic criteria that are used by the company to identify and select foreign strategic business areas.
Table 2.6.1 Strategic criteria
Rice. 2.6.1. Demand Lifecycle Extension
A review of this list shows that most of the criteria apply to both domestic and foreign conditions. However, three criteria are specific to internationalization and deserve clarification:
- extending the life cycle of demand for the company's products;
- extending the useful life of the company's technology;
- acquisition of resources.
In Fig. 2.6.1 shows how demand usually develops in the national (domestic) market. The following stages are typical for it (see Chapter 2.2)
- technologically and competitively variable (turbulent) origin of demand (E);
- accelerating growth in which production capacity is insufficient to meet demand (G 1 );
- slowing growth, which is accompanied by intense competition (G 2 ),
- maturity, when demand reaches saturation (M);
- reduction in those rare cases when initial demand (for example, for men's hats) declines or disappears (D)
At stages E and G 1 The firm's capabilities are usually absorbed by the domestic market. However, at stage C 2 , when competition intensifies and growth slows, additional costs associated with penetration into a country where demand is still in stages E or G 1 may be more than offset by attractive growth and profit opportunities. By the time domestic demand reaches stages M and D, there is strong pressure to move the firm's activities to countries where the demand life cycle is in earlier stages.
So, A company that plans and conducts its internationalization in accordance with the stages of demand development can significantly extend the life cycle of its product.
In industries where changes in demand are associated with the replacement of technology (see Chapter 2.4.), as illustrated, for example, by the chain “electron tubes - semiconductors - chips - microchips”, the useful life of the technology can be extended in a similar way by transferring it to countries with more low level of technological development. This process is presented in Fig. 2.6.2. Perhaps the most impressive historical example is H. Ford I's sale of Model A automobile technology to the Soviet government when it became obsolete for American markets.
Rice. 2.6.2. Extending the technology life cycle
However, the experience of developing countries shows that premature transfer of technology to countries that are not prepared to use it can lead to disastrous results.
The use of internationalization to develop new resources has been widely reported and requires little comment. For example, in the last 40 years, a popular strategy has been to move production to areas with cheap labor or locate processing plants near sources of natural raw materials. However, firms have learned from experience that the benefits of low labor costs do not last forever.
It is expected that labor costs will rise as the country develops economically, making local production unattractive. Firms have also learned that nationalization trends or local government insistence on joint ownership of enterprises can make investments in local mining and manufacturing industries very risky and ineffective.
Returning to the table. 2.6.1, we note the differences in the connections between strategic criteria and goals. The table shows four cases:
Quadrant 1. The most limited strategy is internationalization in strategic business zones that have similar growth. This does not change the growth, profitability or balance of the firm's activities.
Quadrant 2. Criteria that reduce the vulnerability of a company are penetration into an agricultural sector that is not subject to cyclical fluctuations, into a political, socio-technological environment that differs from the national one, or a reliable supply of resources.
Quadrant 3. A firm's short-term profitability is enhanced by strategic business areas that expand its global market position, cause a multiplier effect, provide economies of scale, or other comparable advantages.
Quadrant 4. Development of strategic economic zones with higher growth rates and more developed technology, extension of the life cycle of demand and technology are the most attractive strategic motives for internationalization, as they have a great impact on achieving goals.
Stages of internationalization
In the left column of the table. 2.6.2 shows the typical stages of internationalization from export to international and transnational firm. Column 2 shows the activities in foreign countries ah, which arise as the firm moves from exporting to the transnational stage of internationalization.
As the table shows, transformation into an international corporation is carried out as a process of decentralization, during which activities are increasingly distributed across the countries in which the firm has operations.
Vice versa, the stage of development towards a transnational corporation involves the assumption by the headquarters of the company of new important strategic functions. However, in a well-organized multinational firm this does not mean recentralization, in the process of which the rights of country managers and product line managers are reduced. It is more about expanding the corporate perspective and establishing new relationships between the company's branches. In addition to maintaining their own authority and responsibility, lower-level managers are required to contribute to the development of the firm's global strategy.
The first step towards transnationalization, as can be seen from the table, is the optimization of production lines, types of technology, production and distribution systems of the company (see 2.6.5).
The second step is global strategic planning, in which the set of strategic management zones is optimized from a global perspective.
Development according to the stages shown in table. 2.6.2., was typical in the past. The table reflects the gradual process of accumulation of experience, which was typical for many companies under the influence of the factors discussed in 2.6.1. However, such a scheme does not mean that all firms pass or should pass through appropriate stages. It also does not follow from this that a firm that has become international must inevitably move to a transnational status.
It is interesting to note that many very large American firms have not yet outgrown the international stage in their development. One reason for this is that the American market was dynamic and large enough to enable firms to achieve most of their goals within a national framework.
Another reason is that the transition from international to transnational status requires a radical organizational restructuring.
- A transition is needed from what G. Perlmutter called the ethnocentric principle, in which national culture dominates the company, to a polycentric approach. At the same time, the distinction between foreigners and foreign culture, on the one hand, and the national culture and indigenous residents of the company’s home country, on the other, disappears. In this case, the company develops a supranational management team and a truly transnational culture. American managers, accustomed to operating in a large and culturally uniform domestic market, often exhibited “culture blindness” when they moved to foreign markets.
- The transnational stage also requires a transition to a matrix organizational form (see Chapter 4.3), in which the carefully cultivated and long-time effective American concept of unity of authority and responsibility does not work (see 2.6.6).
In contrast, the limited size of the domestic market, the habit of operating in completely different cultural environments, and less commitment to the principle of unity of authority and responsibility allowed the largest European firms to become transnational.
Part of the progression through the stages of internationalization is determined by the development of the firm's environment. In column 3 of the table. 2.6.2 shows the conditions that make each step necessary. To achieve success. The list, in particular, shows that a company can remain a successful exporter only as long as there are no barriers to the import of goods, local goods do not have specifics and local market conditions are similar to those existing in the internal national market of the company. However, the firm is forced to organize local production when barriers to imports arise or local low-cost advantages become particularly important.
Table 2.6.2 Stages of internationalization
* The number in brackets corresponds to the designations of the criteria in the table. 2.6.1.
For a specific company required degree of internationalization can be quickly determined based on the selection in column 3 of the table. 2.6.2 the line that most closely matches the conditions existing in a particular country.
Using column 3, you can make choices that will ensure the company's success. Real choice the degree of internationalization is determined by strategic criteria accepted by the company. In column 4 of the table. 2.6.2 shows the criteria that are satisfied at each level of activity.
For a particular company, the degree of internationalization that best suits the stated goals can be determined as follows:
- the goals of the company’s internationalization are formed based on their wide list given in 2.6.3;
- when using the table. 2.6.1 strategic criteria are established;
- based on data from column 4 of table. 2.6.2 determines the degree of internationalization that best satisfies the selected criteria.
Last column of the table. 2.6.2 shows how the responsibility assigned to managers in countries is changing.
The table shows that at the first stages of internationalization, the manager in the country is assigned responsibility for solving problems that support and affect individual functions. He begins to acquire the status of a general manager when he is entrusted with the task of optimizing the profitability of a certain product, that is, the subject-specific line entrusted to him. A country manager achieves full general manager status when, on the one hand, he optimizes profitability within the framework of his assigned mission and, on the other hand, participates in the formulation of the firm's global strategy. (As in corporate headquarters, the transition from functional to general management is difficult for managers with only functional experience.)
Achieving transnational status creates an anomaly:
the local manager becomes fully responsible for the company’s activities in the markets of his country, while the corporate headquarters is increasingly engaged in global optimization of the system: products/technology/production/sales/financing. This poses two problems.
- How to reconcile the global benefits of mass production, made possible by optimization at the corporate level, and the ability to respond to local market needs, which requires developing a market and product strategy in accordance with local conditions. This problem will be addressed in the next paragraph.
- How to distribute authority and responsibility when corporate-level units (such as product lines) and country managers legitimately have conflicting views on corporate strategy. This issue is addressed in 2.6.6.
Global synergies versus local responsiveness
As a firm moves toward a transnational stage of development, the most important issue becomes the compromise between global strategies that focus on taking advantage of synergies, economies of R&D and scale in production, and strategies formulated in accordance with the local markets of individual countries, which on their part ensure optimal ability to respond to local conditions and opportunities.
These strategies can be in the following range.
- Standard global strategies, which are equally applicable to all SZH. They may be optimal in industries that produce homogeneous products, such as coal, chemicals, etc.
- Strategies with “cosmetic” adjustments, according to which standard strategies products and marketing are modified locally through changes in packaging, special advertising, etc.
- Specially developed strategies for large strategic management areas and standard strategies for small strategic management areas. This is a mixed version, often found in multinational corporations operating in the field of consumer goods production. It is used when the market in a country reaches a size that justifies the cost of product development and marketing. This type of strategy is imposed on firms in countries where the local government insists that foreign firms establish autonomous and full-fledged enterprises in the country.
- Replaceability (modular principle). The firm develops its strategies on a building block basis, allowing the blocks to be assembled according to specific local conditions. This attractive strategy is difficult to implement, as evidenced by the amount of money that General Motors is currently investing in production in order to realize its concept of a “world car” (competitive in any market in the world - Ed.).
- Special strategies for each agricultural sector play exactly the opposite role compared to global standards. This is a variant of a transnational conglomerate that does not link the activities of similar branches operating in different countries.
In table Figure 2.6.3 shows some of the most important variables that determine the choice of marketing strategy for a multinational firm. The first line indicates that the high level of unique information in a given SBA forces the firm to develop a special strategy for this SBA. This is also due to intense competition (second line), as well as other factors: many different competitive strategies in strategic business areas (high differentiation of market strategies), frequent changes in strategies (frequent shifts in success factors), intense pressure from buyers and discrimination products.
At the bottom of the table there is provision for additional key factors that may be important in a particular agricultural sector. As noted earlier, a set of key factors should be compiled for each SBA and then, using the process described below, the extent to which the overall strategy should be diversified should be selected.
Table 2.6.3. Marketing Strategy Options
In table 2.6.4 provides a similar approach to the product/technology strategy. In table 2.6.3 and 2.6.4 reflect the importance of vaguely expressed knowledge, but other variables in table. 2.6.4 are related to the economic advantages and disadvantages of global product standards compared to different products for each agricultural sector.
Comparison of the table 2.6.3 and 2.6.4 shows that the firm must develop special strategies for SBAs that are focused on the use of new technologies or that are characterized by competitive variability. However, if compliance with local conditions can only be achieved through additional investments that are not justified in terms of potential profitability, then it may be more profitable for the firm not to develop a given agricultural sector at all than to try to introduce standard products that do not meet local requirements.
Table 2.6.4. Product/technology strategy options
In addition to new product development and marketing development, production location is a strategic issue in a multinational firm. The following main alternatives are available:
- Production in every country oriented to meet local needs.
- Global network, when production centers are established in certain countries. These centers are responsible for production for a group of countries.
- Centralized production, in which a single center (not necessarily in the country where the firm is headquartered) supplies the world's needs.
In table Table 2.6.5 lists some of the key factors that determine the choice of an appropriate production location system. When the economies of mass production are great and transportation and worldwide distribution conditions are not important, the best place to locate centralized production is in a country with low production costs.
However, as the experience of the electronics industry has shown, low-cost countries do not remain the most economical producers forever. In the long term, the development of a production location system must take into account changes in costs and available resources. For this reason global network, which allows for the distribution of risk and provision for geographical changes, appears to be preferable in many cases. Especially if legal and economic barriers are taken into account. In the language of cybernetics, a global network provides the required probabilistic solution to a complex and dynamic problem.
Table 2.6.5. Production location options
Choosing a strategy
Conceptually, the selection of marketing, product and production strategies should be based on cost-benefit analysis. The preferred strategy is the one that provides the highest total return on investment over the entire life of the product (or the physical existence of the investment). However, in practice, the relevant variables (including those listed in Tables 2.6.3, 2.6.4 and 2.6.5) are often difficult to quantify, their relationships are poorly understood, and the assessment of uncertainties and risks is difficult.
In such a situation, the graphical analysis techniques used in previous chapters can provide a complementary or even alternative approach to selecting different options for marketing and product technology strategies, as well as production and distribution systems. For mathematically minded readers, it is clear that graphical analysis assumes a linear, unweighted relationship between investment returns and variables. If necessary, clarifications can easily be made by assigning relative priority to the variables on the left side of the corresponding tables.
To determine the options, you must follow the following procedure:
- Determine the optimal characteristics of the strategy for each SZH by constructing appropriate graphs based on the table. 2.6.3 and 2.6.4
- Determine the strategic importance of each SZH for the company. This includes assessing its future importance to achieving the firm's strategic goals, especially profitability, growth and strategic viability. (The assessment can be quantitative or made by relative ranking of strategic management zones. For more details, see Chapter 2.3.)
- Identify large agricultural agricultural enterprises for which the development of special strategies is highly desirable
- Assess whether (and when) profits in these strategic management areas will be large enough to justify developing special strategies for them. Upon reaching this stage, responsibility for developing a strategy and the necessary resources should be transferred to the managers of individual agricultural enterprises.
- Use table 2.6.5 similarly, in order to determine whether the responsibility for self-sufficiency in the areas of production and distribution should also be linked to these SPAs.
- For the remaining small strategic business zones, choose a general product and technological strategy for each group of homogeneous products of the company. Also determine the general elements of the marketing strategy that will be introduced for small strategic business areas.
- Establish common elements of strategies for large and small strategic management areas. This will be the corporate strategy that should guide product development and marketing strategy.
- Develop an optimal global production and distribution network by balancing the costs and benefits of scale of production, transportation, resource availability, local technological development, differences in currencies and barriers to their transfer from one to another.
Distribution of powers and responsibilities
In an exporting corporation, standard products developed for the national market are offered. In all markets. However, there are no marketing strategies that are different for each country.
In an international firm, country managers must formulate own strategy marketing for a set of goods determined by them by the corporation, or receive the right to develop and develop such a set of goods for their country.
As discussed in the previous paragraph, in a multinational firm, strategy is based on a three-way trade-off between demand in local markets, the multiplier effect of global R&D, and a globally optimized production and distribution system.
The process of developing a strategy that is optimal on a global scale is complicated by the existing division of strategic powers and responsibilities between managers in countries who manage products (technology) and managers of the global production system. If each manager is allowed to optimize strategies in the areas for which he is responsible, then the global balance will be distorted in favor of his area of responsibility.
In the past, most of the achievements of entrepreneurial firms (especially in the USA) were associated with the implementation of the principle unity of authority and responsibility. In accordance with this principle, the company's activity will be optimal when certain managers in key positions are given full authority to make and execute decisions in their assigned area of activity. They are fully responsible for the results of this activity.
Without assigning full responsibility for profits and losses to the manager in each country (the above-mentioned case of a multinational conglomerate), this principle cannot be maintained in a multinational firm. As a consequence, most of these firms developed three-dimensional matrix structures in which at least three top managers (and usually more) must participate in formulating strategy for each SBA in each country and for the corporation as a whole.
At the same time, although the principle of unity of authority and responsibility no longer applies in a transnational matrix structure, another principle is usually not formally adopted as its replacement. Strategic coordination is believed to arise through informal interactions based on mutual goodwill and shared responsibility for the firm's global success.
Experienced multinational corporations (such as Shell, Unilever, Nestlé, IBM) have sought to ensure goodwill and commitment to the firm as a whole by placing greater emphasis on developing managers who have a unified corporate culture. The result is an easily identifiable Shell or IBM executive who is similar to his peers and different from other executives.
Part 5 will show that developing a unified corporate culture is a slow process. When strategic change is evolutionary in nature and occurs gradually enough to allow for cultural adaptation, then the way out of the tripartite conflict of interests described above through common culture and training is effective.
However, when strategic change becomes so drastic and rapid that cultural adaptation cannot keep pace with surrounding changes, then informal interaction, as experience shows, ceases to work and the process of formulating strategy becomes difficult and politically unbalanced. These difficulties can be reduced through strategic planning, which develops new, shared goals and guidelines for decision-making (see Chapters 1.2 and 2.3).
Rice. 2.6.3. “Triangle of roles” with distributed powers and responsibilities
Another very promising approach is to formalize strategic decision making by introducing new principle of distributed powers and responsibilities.
This principle is based on the “role triangle” shown in Fig. 2.6.3
Manager in role 1:
- is responsible for the implementation of strategic decisions entrusted to him;
- is responsible for involving managers playing role 2 in the process of preparing decisions;
- has the authority to make the final decision when the process of its preparation with the participation of managers in role 2 does not lead to a consensus;
- is responsible for obtaining decision approval from the manager in role 3.
Manager in role 2:
- is responsible for participation in the decision-making process;
- is obliged to express his disagreement to the manager in role 3 if the final decision is unacceptable to him;
- has the right to ask the manager in role 3 to relieve him of duties that he believes he will not be able to perform due to a decision made by the manager in role 1.
Manager in role 3:
- has the right to override the decisions of managers in role 1;
- is responsible for changing the scope of responsibility of the manager in role 2 if the latter makes such a request.
For example, a product group manager is responsible for implementing the product and technology strategy. Because product strategy decisions will involve the global production manager and several country managers, the product group manager must involve them in formulating the strategy. If no consensus is reached, the product group manager makes the final decision and receives approval from his boss (the company's vice president for R&D).
The Operations Manager and interested country managers are responsible for communicating their disagreement to the President (or their respective superiors reporting to the President). They are also required to request relief from certain duties that they believe they will not be able to perform effectively due to a decision made by the Product Group Manager.
The President (together with the relevant Vice Presidents, to whom subordinate managers report) has the right to overrule or change a decision made by the Product Group Manager. He is also responsible for reviewing the responsibilities of Country Managers and the Operations Manager.
As can be seen from the above, the concept of distributed authority and responsibility encourages coordination and consultation, and also creates conditions for eliminating inevitable conflicts and disagreements.
According to the concept of distributed authority and responsibility, senior managers will play a different role in preparing and making decisions depending on the level and type of strategy being developed. This is shown in table. 2.6.6.
Table 2.6.9. Examples of distributed powers and responsibilities
For example, a product division manager would play role 1 in deciding product strategy and role 2 in formulating marketing and production strategy.
Table 2.6.6 also shows that when deciding issues of corporate strategy, the management of the company should play role 1, the Board of the company (using the word in the American sense) - role 2, and shareholders - role 3. In practice, in most cases, corporate management approves its own strategy Absence The control and balance implied by the principle of distributed powers and responsibilities is one explanation for the growing number of shortsighted miscalculations of the corporate management of large firms.
Process of gradual internationalization
For many firms, as indicated in 2.6.4, the process of internationalization took place through a transition from exporting through the gradual establishment of local marketing, production and R&D to the global development of the firm itself. The explanation for the gradual nature of this transition lies in the high cost of strategic information. The cost of information required for internationalization, as noted in 2.6.1, is significantly higher than the cost of national information. Some vital knowledge of foreign situations can only be gained from direct experience.
When an internationalization strategy takes a firm into countries that are significantly different from its home country, gradual entry becomes desirable for two additional reasons:
- By acting, the company acquires knowledge. Instead of investing in expensive market research, the firm invests in piloting strategic areas of the business and, through practical experience, gains knowledge of the critical factors that ensure success.
- The gradual development of a given country allows the company to control risk by regulating the degree of involvement in internationalization.
In Fig. 2.6.4 shows the stages that can be distinguished during the planned gradual internationalization.
Managerial Capacity for Internationalization
In the early stages of internationalization, a firm may enter into sales agreements for its products or acquire sales firms in other countries. While foreign sales may reach a high level, management competence varies little - foreign sales are usually handled by the export department, whose employees organize and support the export offices and deal with orders coming from them.
Typically, if export volumes and earnings continue to grow at a satisfactory rate, overall responsibility is assigned to the export department while corporate management concentrates its attention on other issues.
As a result, a paradoxical situation may arise when a significant share of the company's sales and income comes from foreign countries, the socio-economic-political-technological features of which are poorly understood by corporate management.
If the internationalization of such firms evolves beyond exports to various forms of local presence and ultimately to transnational status, then it becomes critically important for management to realize that transnational entrepreneurship requires a number of potential abilities and capabilities that the exporting firm does not possess. Among the characteristics of a high level of internationalization, the following should be mentioned.
- Organizational culture is focused on change, is flexible, with a minimum of commitment to past behavior, ready to perceive new opportunities and welcoming them. In the ethnic sense of the word, this culture is receptive to foreign values, views and ways of doing business.
- Managers tasked with internationalizing a company know how to take entrepreneurial risks., are able to identify key success factors in unfamiliar situations and work in conditions of uncertainty. They have experience in cases involving cultural, socio-political factors that affect profit making in foreign countries.
- The company's information system is global in scope and susceptible to new phenomena, is capable of capturing important international differences. This system relies heavily on the local knowledge, perceptions and judgment of managers located locally in different countries. It contains not only economic-competitive, but also socio-political-cultural data, not only quantitative, but also judgment-based qualitative information.
- Strategic planning is decentralized, so as to enable country managers not only to formulate and implement their own strategy, but also to contribute their specific understanding to the global strategy. Strategy formulation includes analysis of political risk and cultural differences.
- The structure is flexible, easily adapts to different geographical conditions and areas of business.
- Manager Roles determined in accordance with the principle of distributed powers and responsibilities.
- A multi-factor system of incentives and rewards has been created.
Some of them are related to efficient profit generation, others - to ingenuity and willingness to take entrepreneurial risks. The system shows tolerance for failures that result from bold risks.
- General management capacity is flexible and is capable of self-renewal in response to changing foreign conditions.
From the above it is clear that The potential for transnational governance has much in common with the potential required for a socially responsible firm(see 2.5.9).
conclusions
The chapter examined the following distinctive features of internationalization
- The costs and risks associated with internationalization are higher than those associated with domestic diversification. Therefore, it has been shown that a firm must be clear about its strategic directions and goals, and must be confident that internationalization is the best way to achieve them.
- The process of internationalization usually takes place through gradual involvement in local entrepreneurship. The chapter describes the advantages and imperatives of various forms of presence in foreign countries.
- The main reason for the graduality of internationalization is the high cost of information and the lack of knowledge about doing business in unfamiliar countries. A step-by-step procedure is described by which a company can gradually carry out internationalization.
- When a firm achieves transnational status, it begins to optimize its global strategy by managing the tensions between the global scale of the economy and its ability to respond to local conditions. Procedures are proposed for determining the preferred level of diversity in global product/technology, marketing, and production/distribution strategies.
- It is extremely difficult to apply the principle of unity of authority and responsibility in a transnational corporation. A replacement principle of distributed powers and responsibilities is proposed.
- Often the main obstacle to successful internationalization is the lack of necessary management skills. This disadvantage is obscured by the fact that a company in which exports account for a large share of sales considers itself already internationalized. The qualities that management must have for successful internationalization are identified.
Faculty of World Economy and International Politics
Department of International Business
Final qualifying work
on the topic: “Strategies for the internationalization of the Russian state corporation Rosatom into the international market”
Student of group No. 561
O.A. Sinister
Scientific director
YES. Medvedev
Moscow 2013
Internationalization and its strategies……………………………..……5
Trading strategies…………………………………………….…7
Cooperation strategies…………………………………………...…10
Investment strategies…………………………………….….13
State Corporation "Rosatom" in the international market……………….…16
Cooperation with India………………………………………….24
Cooperation with China……………………………………….…28
Cooperation with Turkey………………………………………...31
Export strategy of Rosatom State Corporation……………………………..37
International scientific cooperation of the Rosatom State Corporation……….42
Activities on the Bulgarian energy market…………………..47
The situation on the electricity market in Bulgaria……………………47
Belene NPP and Kozloduy NPP……………………………...49
Prospects for the presence of the State Corporation "Rosatom" in the energy market of Bulgaria……………………………………………………..51
References……………………………………………………….56
Applications……………………………………………………………………………….…….59
Introduction
Rosatom State Corporation is a unique global nuclear energy company. It includes 240 companies in the civil nuclear industry, scientific organizations, weapons complex enterprises, and a nuclear icebreaker fleet. The state corporation conducts international activities in many countries of the world. Rosatom is one of the leaders and a key player in the international arena in the field of nuclear energy. The company is a leader in the number of nuclear power plants it constructs and provides 40% of the global nuclear market with nuclear energy services. In the conditions of fierce competition in the global market in the field of nuclear energy, the State Corporation Rosatom has to make a sufficient amount of effort not only to cope with the competition, but also to maintain its leadership position. The company's activities are global, and its areas include the following aspects: construction of nuclear power plants, export of enriched uranium, uranium enrichment services, international scientific activities, cooperation with the International Atomic Energy Agency (IAEA) in the field of environmental protection. Thanks to its expansion into the international market, Rosatom State Corporation has become a significant player in the international arena.
Like all international companies, Rosatom State Corporation adheres to certain strategies and directions when entering international markets. In order for expansion into new foreign markets to be most effective, research and analysis of the nuclear energy sector in various countries of the world is carried out, trends are studied and prospects for presence in a particular market are outlined.
In the current state of the world economy, the topic is relevant, since in the context of increasing electricity consumption in different countries, the need to create sources of this energy is growing. Nuclear energy is designed to fill the electricity market. The topic reveals the concepts of internationalization, strategies for entering international markets, and trends in international cooperation.
The novelty of this research work is that it examines various ways of entering international markets and various areas of activity in the international arena.
The main goal of this thesis is to study and identify strategies through which Rosatom State Corporation enters the international market.
The main objective of this research work is to cover most of the countries where Rosatom State Corporation is present and analyze the strategy through which Rosatom entered this market.
The object of this thesis is the State Corporation Rosatom, which operates in the field of nuclear energy.
The subject of this study is the internationalization strategy of the State Corporation "Rosatom" into the international market.
Various sources were used when writing the work. In particular, “International Marketing and Business” by N.K. Moiseeva, which examines the features of choosing international markets, ways of entering international markets, motives and stages of internationalization of companies. The official websites of nuclear energy companies, namely the Russian State Corporation Rosatom, were also used. Various statistical databases were used. Also, when writing this work, articles on nuclear energy from different countries of the world were considered.
Internationalization and its strategies
Since the 50s of the last century, the world economy has entered the process of globalization. In pursuit of greater profits, companies are seeking to enter new foreign markets. Globalization is causing a change in the structure of all international actors. This means that in the current conditions of globalization, subjects of international life cannot function alone without interacting with other participants in the international market. This mutual cooperation can be of a different nature: political, economic, social, cultural, etc. The process of international cooperation in the economic sphere is especially pronounced. In modern life, success is determined not only by production volumes and the number of products produced, but also by the presence of market infrastructure, the use of high technologies, high-tech materials, etc. All this will determine the company’s success in the international arena. But these success factors will depend, in turn, on the availability of capital in the country and the ability of institutions to work towards establishing international economic ties, which allows us to occupy and maintain positions in the international market. One of the most important aspects of globalization can be called internationalization. In the process of internationalization, capital between countries begins to move more freely, flowing from one country to another, and concentrates where the conditions for successful business activities are better, which allows for more profit. As a result of internationalization, investment becomes not only a national matter, but also an international one. This can be reflected in the nature, direction and volume of investments. Thus, in modern conditions, to create a successful company, it is not enough to invest a certain amount of money in its development. In order for the created enterprise to be competitive, the investor must have the ability to attract high technologies, the presence of economic ties and the provision of information, which will help increase competitiveness and successfully enter the international market.
One can observe a shift in the global economy towards developing countries due to the increase in the number of consumers in such countries. There are two main factors in the internationalization process 1: the development of communication technologies, which ensures fast and high-quality information exchange, and the labor market. The young population of developing countries ensures that the labor market is filled with qualified labor, which makes such countries promising for development by new companies and involves them in the process of globalization.
In a highly competitive environment, companies enter the international market to confirm their leadership position in a particular industry.
There are a number of reasons why companies seek internationalization. In a situation where the domestic market is already saturated, it is necessary to attract new clients and consumers in the market of another country, which allows the company to continue to make a profit and establish long-term prospects.
When producing their products for export, companies rationally use economies of scale, because Sometimes domestic markets may be limited by the quantity of products that can be sold in the domestic market.
The concept of core competence plays an important role. Possessing key competencies, the company is more competitive not only in the domestic but also in the foreign market. The term “core competency” was introduced by G. Hamel and K. Prahalad 2. This term refers to a certain set of skills, abilities, technologies and experience that only this company possesses. This set provides a competitive advantage to the organization. Key competence emerges through long-term work, accumulation of experience and high-quality work of personnel.
Another reason for entering the international market is the risk factor. Working in the markets of different countries allows you to reduce country risk. By diversifying the production and distribution of goods, companies can avoid losses that arise, for example, due to economic downturn or political instability in one country, and make profits in another.
There are a large number of ways, models and principles of entering new foreign markets. We will call all these models and methods under one general concept: “Internationalization Strategies.” In turn, the strategies represent a whole scheme (see Appendix No. 1). All internationalization strategies can be divided into three large blocks, each of which will be further divided into certain types:
Trading Strategies
Cooperation strategies
Investment Strategies
1.1. Trading Strategies
Trading strategies include trading in goods and trading in services. Accordingly, when trading goods there is import and export, and when trading services: licensing; franchising; subcontracting; engineering; leasing; insurance and banking services; transport services; international tourism.
Let's look at these concepts separately.
Export refers to the export of goods and services abroad for the purpose of selling them on the foreign market and making a profit. This method of entering the international market is considered one of the least risky. Exporting products does not require significant adjustments to the domestic sales market and the existing assortment, the organizational structure of the enterprise does not change, and the least amount of resources is spent. However, risks exist in the areas of the legal framework, export mechanisms and the solvency of the receiving party.
In practice, there are two types of exports: direct and indirect 3.
Direct export involves the supply and sale of goods directly abroad through its own resources and personnel. This method is easily implemented when there is no need to look for consumers and clients, but they themselves contact the seller. The company can resort to the following tools to export:
export department (dealt with all matters related to the supply and promotion of goods on the foreign market);
availability of our own personnel (sales representatives) abroad;
a team of foreign specialists helping in the development of the foreign market, supporting and stimulating the sales of products.
Another type of trading strategy is licensing. “Licensing is used when a foreign company (licensor) transfers the rights to own a certain object to a local company (licensee), which in turn must perform certain work or make payments in accordance with the concluded license agreement” 4 . In this way, the company gains access to the foreign market with the least risk, and the licensee gets the opportunity to use ready-made technologies, the opportunity to use a brand and produce an already known product. There are a large number of companies in the world that resort to licensing as a model for operating in a foreign market. For example, the Coca-Cola company sells licenses and concentrate for the production of its products to other soft drink manufacturers around the world.
However, there are disadvantages to this type of internationalization. For example, the licensor company has less control over the licensee's production than if that company were in charge own production. In addition, after the end of the licensing agreement, there is a risk that a new competitor will appear instead of the licensee.
Another type of internationalization trading strategy is franchising. “Franchising is a special form of licensing, where the franchisor not only sells an intangible asset (usually a trademark) to the franchisee, but also obliges the franchisee to comply with certain rules how to run a business. The rules and procedure for using a franchise are reflected in the agreement between the franchisor and the franchisee. Typically, the agreement determines the amount of royalties for using the franchise, which in turn can be fixed, one-time for a certain period, or calculated as a certain percentage of sales. In cases where there is no requirement for royalties for using a franchise, the franchisee must purchase a certain amount of goods, works and/or services from the franchisor. The conditions for using a trademark (brand) may be included in a separate clause of the contract. These requirements can vary in degree of complexity: the franchisee may use a brand in a certain area, or the franchisee is required to manage the equipment in the store in strict accordance with the franchisor’s requirements, from the size and color of the shelves to the mandatory uniform of staff work clothes” 5 . Like other methods, franchising has its advantages. By entering a new market through franchising, a company has more control over the distribution of its products and maintains its own style, image and brand. If the franchisee is dissatisfied with the work, the franchisor can always easily terminate the cooperation agreement without incurring large losses.
1.2. Cooperation strategies
This type of strategy involves the implementation of joint programs, where the parties are co-owners of the results of joint activities. With this strategy, resources and risks are shared and distributed. Cooperation strategies are divided into:
Non-equity strategic alliances
Co-production and/or marketing
Joint research activities and technology exchange
Informal strategic alliances
Equity strategic alliances
Joint ventures
Mutual exchange of shares
Dependent companies
Satellite enterprises
Minority Equity Partnerships
Strategic alliances are divided into two main types: non-equity strategic alliances and equity strategic alliances. The first type, in turn, is divided into: co-production and marketing; joint research and development activities and technology exchange and informal strategic alliances. The second type of strategic alliances is divided into: joint ventures; mutual exchange of shares; affiliated companies; satellite enterprises; minority equity partnerships. From this we can conclude that alliances operate in three areas of activity: joint work to enter new markets; work on R&D projects; joint production of products.
There are a number of features inherent in strategic alliances:
This form of cooperation allows companies to work together effectively, but does not lead to a merger of companies;
The cooperation is aimed at the medium and long term;
Planning of activities takes place jointly with all members of the alliance, which allows work to be beneficial for each of the parties;
The alliance itself cannot be a legal entity;
All members of the alliance remain independent legal entities;
Alliances are created between firms located in related fields, and which can complement each other’s activities with experience, skills, and technologies;
The same company can be a member of several alliances;
Despite the fact that alliances are aimed at the long term, they are all created for a certain period of time and disintegrate when the need to work together disappears;
Alliances make companies more competitive through joint efforts against common competitors.
There are several reasons to create an alliance:
enterprises become more competitive in their industry;
it becomes possible to use the missing production capacity at the expense of the alliance partner;
mutual exchange of experience, know-how, resources, technologies;
increasing the stability of enterprises and reducing risks;
the ability to use a method of entering a specific market that already exists thanks to one of the alliance participants;
joint scientific works aimed at improving production.
An example is the alliance between IBM and Apple. “The AIM Alliance was an alliance formed in September 1991 between Apple Computer, IBM and Motorola to create a new computing standard based on the PowerPC architecture. The stated goal of the alliance was to challenge the dominant Wintel computing platform with a new computer design and next-generation operating system. It was believed that Intel's CISC processors were an evolutionary dead end in microprocessor design, and that since RISC was the future, the next few years were a period of great opportunity."6
1.3. Investment Strategies
Investment strategies involve ownership and control strategies, ownership of property abroad, both partial and full. This strategy can be divided into the following types:
Creation or acquisition of a company abroad
Branches and representative offices
Construction of a new enterprise
Mergers
Takeovers
The above undoubtedly speaks about the effectiveness of this form of cooperation.
Mergers and acquisitions are also a strategy to enter a new international market. Mergers and acquisitions are a process in the economy that is aimed at consolidating economic units, which leads to the emergence of new larger participants in the market, instead of several smaller ones. The merger process involves the combination of several theoretically equal economic units, resulting in the emergence of a new economic entity. A merger may result in the liquidation of autonomous legal entities and the creation of a new legal entity and taxpayer that assumes all assets and liabilities from the companies involved in the merger process. Also, participants in the merger process can transfer the rights of control over their organizations to the authorized capital, but at the same time retain the organizational and legal form of the participating enterprise. There is another type of merger process, when one of the companies leaves its organizational and legal form, and the remaining companies participating in the merger process operate independently and cease to exist.
Acquisition means the process of acquiring the authorized capital of a company in the amount of at least 30%, where the legal independence of this company is preserved.
State Corporation "Rosatom" in the international market
The development of the Russian nuclear energy industry abroad has two main directions. The first is focused on developed energy markets, where the decision on interaction is made after a detailed study of the projects provided by the Russian side, namely their safety and competitiveness. All types of risks are assessed: political, economic, technological. Particular attention is paid to the risks associated with the supply of plants, equipment, fuel and operation.
The second direction is focused on developing markets, where the main emphasis is on project financing from Russia. Such developing countries prefer to work in accordance with international standards and IAEA requirements, but the main emphasis in cooperation is not on excessive safety, but on the opportunity to obtain financing for the construction and support of nuclear energy facilities 8 .
So, to begin with, I would like to consider projects that are generally aimed at international cooperation and international activities in the Rosatom State Corporation. At the end of last year, the General Director of Rosatom gave an interview to TV channel 9 “Russia-24”, where he summed up the results of 2012 and emphasized the area of international cooperation.
Now India is actively developing nuclear technologies and this moment The Kudankulam nuclear power plant is being built there using Russian technologies. Based on this, one can not only talk about long-term plans for cooperation between India and the Russian Federation, but also observe their consolidation by an appropriate agreement. This agreement refers to a document called “Road Map for the Construction of Nuclear Power Plants in India Using Russian Technologies.” The first place on this road map is the Kudankulam nuclear power plant, located in the southernmost part of India. A huge power shortage can be observed in this area, so power generation of 2000 megawatts is urgently needed in this region. The construction of the Kudankulam nuclear power plant will provide India not only with sources of electricity, but will also create additional jobs. The creation of nuclear power plants in India will take place in two stages: the construction of the first and then the second power units. Analysis of stress tests shows that these power units meet all safety requirements, and moreover, the Kudankulam NPP would withstand a natural shock similar to what happened at Fukushima in 2011. In 2012, an agreement was received to issue a government loan for the construction of two more power units on the same Kudankulam territory in India. Over time, about eight blocks will appear on this site. At the moment, it is assumed that India will allocate two more territories for the construction of nuclear power plants by Russia, each of which will have 4 power units. The construction of a nuclear power plant in India using Russian technologies involves the construction of about 16 power units, which indicates the global nature of the cooperation project. In addition, the construction of stations assumes that fuel for it is supplied to each nuclear power unit. There are also agreements on joint scientific activities with Indian colleagues. At the moment, joint scientific developments are underway to use thorium as fuel for nuclear power plants, since India ranks first in the world in terms of thorium reserves.
The geography of Rosatom's work on the international market is quite wide. Currently, the State Corporation has 19 signed contracts for the construction of new nuclear power units. In countries such as:
Türkiye;
Vietnam;
Belarus;
Bangladesh.
In China, this is the Tianwan NPP, where the first two power units are already operating successfully. According to Chinese experts, these structures are now the safest of all those operating in China. Thanks to this, contracts were signed between Rosatom and China for the construction of the third and fourth nuclear power units. According to forecasts, this construction should be completed in 2017. In December 2012, Chinese Prime Minister Hu Jintao visited Russia. At a meeting with the Chairman of the Government of the Russian Federation, it was decided to begin negotiations on the construction of not only the third and fourth power units, but also the next ones, which could be located not only at the Tianwan site, but also at others.
As for Turkey, there is now a signed agreement between the Russian Federation and Turkey on the construction of the first nuclear power plant in Turkey. The model of cooperation between Turkey and the Russian Federation is slightly different from those described above. Due to the lack of resources and qualified personnel, the Turkish government invited the Russian Federation to build, invest and own this nuclear power plant for the entire period of its operation, i.e. 60-80 years old. This is a huge program, with construction costs amounting to 20 billion US dollars, and even more revenue from the electricity produced by it. This project suggests that Russia with its nuclear program is coming to Turkey for approximately 100 years.
Despite high competition, the State Corporation Rosatom received the right to build the first nuclear power plant in Vietnam. At the moment, all contracts have already been signed, and scientific research activities are underway. Rosatom is constructing the first two nuclear power units at sites in Vietnam.
Design work has already been completed at the nuclear power plant in Belarus and construction of the nuclear power plant there has begun at full capacity.
In Bangladesh, a country that did not have nuclear power but was experiencing an energy deficit, the government decided to build the first nuclear power plant on the territory of this country, the construction of which was entrusted to the Russian State Corporation Rosatom.
In addition to the construction of stations, a large number of competitions and tenders are held around the world, in which Rosatom, without fear of competition, actively participates. Thanks to confidence in its technologies, the corporation is looking forward to some countries where tenders are currently being held. An example of this is the Czech Republic, Hungary, and Slovakia, which are currently holding competitions for the construction of nuclear power plants.
The government of Bulgaria stopped the construction of the Belene nuclear power plant on the territory of its country, instead offering the Russian corporation the construction of another new power unit at the Kozloduy nuclear power plant in Bulgaria.
The Russian side has a number of new partners with whom Russia has not worked before. For example, South Africa is open to cooperation with the Russian Federation for a large program in the field of nuclear energy. Rosatom already supplies nuclear fuel to South Africa, which represents good contracts.
Recently, the Rosatom State Corporation won a tender in the United Arab Emirates aimed at supplying fuel, the contracts for which will amount to hundreds of millions of dollars. In the UAE, programs related to nuclear energy. As for Arab countries, it is also worth noting Saudi Arabia and Jordan, where tenders are being completed. The State Corporation is already operating in this region. For example, in Iran, the Rosatom State Corporation has already completed the construction of the first power unit.
For the Rosatom corporation, Latin America, a continent in which the Russian side has not yet worked, can be considered promising in the international arena.
The general director of the state corporation Rosatom believes that such a number of promising global projects is due to the fact that the world has recovered from the Fukushima shock.
Giving estimates for 2012, Sergei Kiriyenko noted that last year began with a mark of 50 billion dollars per year in the volume of funds for contracts concluded abroad, and it ends with an estimate of 69 billion US dollars. The corporation not only did not weaken its position, but rather increased it by 40%, although foreign competitors and analysts predicted a two-fold decline. All this was the result great job, since for Lately the market had changed, and it was necessary to establish connections with new partners.
Also, the result of the work of past years was the purchase of uranium deposits abroad. When developing global programs in the field of nuclear energy development, it turned out that there is a shortage of uranium deposits in the Russian Federation. In the USSR, basically all the deposits were located on the territory of the Central Asian republics. A large amount of public funds were allocated for the acquisition of these deposits, which resulted in the acquisition of more than 20% of uranium deposits in Kazakhstan. In addition, mining is carried out in Africa and the USA (20% of uranium reserves in the USA). According to preliminary data, all uranium reserves located on the territory of the Russian Federation and other countries of the world will be enough for 100 years to supply all nuclear power plants in Russia and all those built by the Russian side in the world.
The Rosatom State Corporation can be called unique, since its achievements include active international development, therefore, expansion of the geography of operation (see Appendix No. 2). There are no similar examples in the world of such a sharp breakthrough in the globalization of business. 5 years ago the company did not even imagine such a major development. At the moment, we can say that Rosatom State Corporation is beyond competition. The company is able to reliably design, build and operate nuclear power plants 10 . One of the most successful areas can be called the construction of the Tianwan NPP in China, where more than 20 IAEA missions took place, which confirmed that this is the only third-generation nuclear power plant built in the world. Another confirmation of successful international activities is the number of signed contracts for the construction of nuclear power plants on the foreign market, and the State Corporation has 21 power units, i.e. 21 contracts. No other nuclear energy company in the world has such a portfolio of orders, which once again indicates the high competitiveness of the Rosatom State Corporation. The development strategy implies the consolidation of personnel, scientific developments and technologies, which creates for Rosatom a serious amount of competencies that no other nuclear energy company in the world possesses. The state has set ambitious goals and objectives for the Rosatom Corporation: to become a world technological leader through new scientific developments, to organize a business in the international arena and to become one of the top three companies by revenue in Russia. All this must be accomplished by 2030. A few years ago, income reached 5 billion. dollars per year, and now this figure is exactly three times more, i.e. 15 billion dollars a year. The scale of work until 2030 is expressed in the capacity of nuclear power plants that are being built around the world using Russian technologies. There are clear strategic calculations behind this increasing scale. At the moment, one of the key requirements for the construction of nuclear power plants in the world is safety, so customers are extremely careful when choosing partners and the technologies they use. There is a new trend among customer countries - receiving complex services, i.e. not only the construction of nuclear power plants, but also the supply of fuel, new joint scientific developments, joint training of specialists. And in this area, Rosatom has a competitive advantage. A clear example is that immediately after the signing of the contract for the construction of a nuclear power plant in Vietnam, an agreement was signed on the creation of a scientific center. Within this framework, Vietnamese students are already being trained at the Obninsk branch of MEPhI. Vietnamese colleagues say that they intend to receive a comprehensive service from Rosatom State Corporation: fuel supplies, training of qualified personnel, joint scientific development, joint work in the field of improving safety systems. As the General Director of the Rosatom State Corporation states, this is a serious competitive advantage and there is no similar company in the world that would provide the same range of services. This development strategy allows us to claim 20% of the total volume of nuclear power plant construction in the world.
The company is successfully developing a “build-own” strategy for entering a new market, i.e. BOO (Build-own-operate). A successful example is the Turkish market, where the State Corporation enters not for five years, but for the entire service life of the nuclear power plant, which can reach 80 years. This model includes not only the construction and operation of a nuclear power plant throughout its life, but also the sale of new scientific developments, in particular in the field of fast reactors and closing the fuel cycle.
This is the latest way of doing business, which Rosatom is actively developing in all markets where the State Corporation enters, winning tenders from such serious competitors as the USA and Europe. It is planned that the State Corporation will build power units in 15 countries around the world. List of countries with which contracts for the construction of nuclear power plants have been signed:
China (2 blocks)
India (4 blocks)
Vietnam (2 blocks)
Bangladesh (2 blocks)
Türkiye (4 blocks)
Armenia (1 block)
Ukraine (2 blocks)
Belarus (2 blocks)
Bulgaria (2 blocks)
In connection with the announcement of international construction tenders, the following countries are promising directions for the State Corporation:
Egypt (3 blocks)
Kazakhstan (2 blocks)
Hungary (2 blocks)
Czech Republic (2 blocks)
Slovakia (1 block)
Jordan (2 blocks)
Argentina (2 blocks)
Thus, the geography of Rosatom's work stretches across the entire globe. The increase in the number of orders from the State Corporation among foreign partners indicates confidence in Russian technologies and specialists. All projects that Rosatom State Corporation conducts and implements belong to the “3-plus” category, which means that the facilities are equipped with active and passive safety systems. All nuclear power plants that will be, and are already being built on international markets, have a number of special protection measures and meet all safety requirements established after the Fukushima tragedy.
At the moment, there are 45 major players in the world that are capable of providing services in the field of nuclear energy, and Rosatom State Corporation is among the top three. Previously, colleagues from Europe invited our specialists to cooperate, but now our country invites us to take part in experiments on our world-class facilities, which is also a new direction in business.
Rosatom's active work in the international market contributes to the successful development of all Russian business abroad.
Internationalization is about business crossing national borders. Due to the institutionalization of international economic relations, the reduction of barriers to trade and financial flows, and the expansion of transport and communication infrastructure, companies are seeking to increase their international activities Lucia Paliu-popa, Economy Globalization and Internationalization of Business, MPRA Paper No.18568, posted 12. November 2009, p. 2.
The process of business internationalization occurs in several stages, each of which is associated with a specific method and strategy:
At the first stage of development, the process of trading the company's products is internationalized. International transactions involve the export, re-export of goods and services, or the establishment of trade missions.
Export is the simplest and most common exit method. There are indirect and direct exports, as well as active and passive. Occasional export, or passive export, differs in the frequency of transactions, i.e. the company enters the market from time to time, in accordance with the organization’s goals or when receiving an order from a foreign client. With active exports, the company expands the sales of its products in a specific market. The company produces products on the domestic market, but adapts them to the needs of the foreign market. This strategy involves certain changes in the policies, objectives, and structure of the organization. When independently exporting products, the company faces additional costs and risks, which can be offset by savings on intermediary fees. An advantageous difference is the possibility of control over the exported products by the manufacturing company.
An enterprise may use the services of foreign distributors or agents who have exclusive or limited rights to represent the manufacturer in a specific market.
The second stage involves the internationalization of the production process.
Creation of various forms of alliances, international cooperation for the purpose of technology transfer (licensing, franchising, sale of know-how, etc.).
An enterprise can buy foreign licenses. The licensor grants the licensee, for a fee, the use of trade secrets, a trademark, or a patent. Thus, the exporting manufacturer gains access to the foreign market, optimizing risks. Another method is contract manufacturing, where the production of a product is entrusted to a local company. However, the company is deprived of the opportunity to exercise constant control over the production process. At the same time, this type of licensing allows you to quickly enter the foreign market, reduces risks and facilitates the possible creation of a joint venture or your own venture in a foreign market.
Franchising is a common form of licensing where a brand name and an established production network are sold.
- - partial or complete relocation of production, use of distribution channels on the foreign market (joint production, joint research activities, etc.).
- - creation of a joint venture (JV) and marketing system abroad.
Creating a joint venture is another way to enter a foreign market. The creation of a joint venture may be a necessary condition for penetration into a foreign market due to state policy, or a source of financial, material, and managerial resources.
At the last stage, the internationalization of the enterprise occurs. Internationalization is achieved through foreign direct investment (creation of foreign branches, representative offices, construction of a new enterprise, mergers and acquisitions).
Direct investment, a form of entering a foreign market through the creation of an assembly or production plant abroad. Direct investment by a company may be a result of low cost of raw materials, labor, incentives provided by the government in the foreign market. Forming a positive image of the company by creating jobs is also a strategic move of the manufacturing company. Through direct investment, an enterprise can tailor its products to the needs of a given market by maintaining good relationships with government agencies, consumers, suppliers and distributors. The company has the ability to control investments, production and marketing policies in accordance with long-term goals. However, the enterprise is in no way immune from deteriorating market conditions on the foreign market, changes in the exchange rate, or expropriation of property in cases of political upheaval in the country.
If penetration into a foreign market is associated with high costs and risks or the national market is not completely open, then the company, instead of creating its own enterprise abroad, may enter into a strategic alliance with a foreign partner. The purpose of creating a strategic alliance is to distribute costs and risks between companies, gain access to a new market, increase market share, obtain government orders, enter into alliances with state-owned companies, gain access to or exchange technology. Strategic alliances can take the form of joint production or marketing, joint research and development and technology exchange, mutual exchange of shares, joint venture, creation of an affiliate or satellite enterprise, minority equity partnership, informal strategic alliance Emanuel Todeva, David Knoke, Strategic Alliances & Models of Collaboration, 2005.
There are three categories of strategic alliances: full ownership of shares or shares, partial ownership or non-equity alliances. Three conditions define strategic alliances: two or more companies of different nationalities are trying to achieve a set of common goals previously agreed upon, the enterprises have control over the alliance and a share in the product being created, the partners constantly contribute to one or more areas of the alliance's activities. A strategic alliance helps reduce intercompany disagreements, promotes active cooperation between independent organizations to achieve competitive advantages for all partners, or can act as a temporary agreement. A strategic alliance is one of the most flexible methods of cooperation. It can be concluded as part of the company’s interaction with: suppliers, consumers, competitors, an enterprise producing a similar product in another market or producing another product in the same market, a non-profit organization, the state, a university, etc. A strategic alliance is distinguished by a greater degree of intercompany integration from service or licensing agreements, franchising, technology exchange agreements, outsourcing, or research collaborations.
Technology companies producing high-tech products face important choice cooperation with a foreign enterprise or independent activity. Cooperation helps to achieve the goals set by the organization faster and with lower costs and risks.
Firstly, the alliance helps the company quickly obtain missing resources, technologies, skills, because multiple companies have greater opportunities to develop competitive advantages within the same organizational structure. Secondly, companies become flexible and reduce their asset liabilities. In a technology-driven market, innovation determines a company's success. An enterprise loaded with obligations and large expenditures on fixed assets falls out of the competition. Thirdly, the creation of a strategic alliance is associated with the exchange of knowledge between partners and the opportunity to learn from the partner’s corporate culture. It is possible to transfer strategically important knowledge and skills that would be difficult or impossible for a company to obtain alone, or to create new technologies. Fourth, research and development is associated with high costs and uncertainty; companies share risks and costs among themselves. Fifthly, the alliance allows the application of technological standards at the stage of product commercialization, when substitute and complimentary goods are produced according to uniform standards.
Thus, strategic alliances enable its participants to access a new market, increase the return on investment, access to resources, necessary technologies and knowledge, achieve efficiency through economies of scale through the rationalization of production, and open up new growth opportunities that are unattainable alone. Creating a strategic alliance allows a company not only to take advantage of existing advantages, but also to quickly take advantage of the opportunities of other companies Ying Zhang & Sergey Filippov, Internationalization Strategy of Chinese Companies in Europe, 2009. Table No. 3 shows the difference between the goals and motives for creating or acquiring a company for abroad and concluding a strategic alliance.
Table No. 3
Comparative analysis of strategic alliances and FDI
|
FDI/subsidiaries |
Strategic alliances |
|
|
Goals and motives |
Creation of an enterprise in a specific country with the purpose of: access to resources, market, assets, achieving efficiency |
Strengthening positions in a specific market through cooperation with foreign partners |
|
Elasticity |
The creation of a subsidiary through FDI is part of the long-term strategy of the parent MNC and requires certain competencies, constant involvement, etc. |
Very flexible form, because created to achieve a specific goal and then canceled |
|
Management control |
If the parent company owns more than 10% of the shares of the subsidiary, then it is considered part of the MNC, which constantly strives for complete control over the operations of the organization |
Partners reserve the right to control management |
- 1.1 Internationalization theories and their evolution
The evolution of the internationalization model is associated with changes in the enterprise's strategy as its foreign economic activity develops. With the transition from one method of foreign economic activity to another, the following occurs: an increase in the riskiness of the operation, an increase in the company’s involvement in foreign activities, an increase in control over foreign operations, and an increase in the return on investment.
There are different schemes for business internationalization. With a staged approach, the company actively develops its activities within the country, and then consistently moves to foreign markets. Two economic models determine the staged development of a business:
- 1) Product life cycle theory (R. Vernon, 1966, 1971) G. Baronchelli, F. Cassia, Internationalization of the firm: stage approach vs. global approach, 8th Global Conference on Business & Economics, October 2008, p. 3;
- 2) Uppsala internationalization model (Johanson & Vahlne, 1977, 1990).
According to the first model, the internationalization of a company follows from the development of the product life cycle. Product introduction occurs simultaneously domestically and internationally as we move toward a global strategy. The product goes through three stages of maturity. First, a technologically new product is produced in a developed country. At the maturity stage, mass production of goods is established. The company strives to achieve economies of scale and transfers part of its production to foreign economies with a similar level of development, where there is a demand for these products. If at this stage production becomes cheaper in a foreign economy, then the goods can be imported into the domestic market. At the last stage of the product life cycle, the production process becomes standardized and more labor-intensive than knowledge-intensive. Production moves to developing countries and covers all demand for products.
The model applies more to developed countries with a high degree of innovation. It can also be used for developing countries if the company independently uses new technologies.
Uppsala's business internationalization model assumes that the company gradually increases its presence abroad Johanson, J., Vahlne, J-E. (2006). “Commitment and Opportunity Development in the Internationalization Process: A Note on the Uppsala Internationalization Process Model”, Management International Review , 46 (2), pp. 165-178.. The internationalization of a company begins with markets that are similar in cultural, political, economic, geographic, etc. features. The firm begins its overseas operations with exports and gradually moves towards more intensive operating models. Next, the enterprise gains enough experience in doing business in a foreign market, acquires new knowledge, advantages for penetrating the markets of more distant countries, i.e. with other economic, cultural, etc. characteristics.
Both models describe the sequential introduction of a company into foreign markets and conclude that the main obstacle to the international development of an enterprise is a lack of experience and knowledge about the foreign market. The models assume the following development scheme: sales on the domestic market, export through an intermediary, opening a trading subsidiary, organizing production abroad. The procedure for the company’s entry into foreign markets has also been determined. First, investments go to a similar market, then to a more distant one. According to the models, the company begins to enter the foreign market only after achieving maximum expansion in the domestic market.
Limitations in the use of models come from the changing conditions of modern markets. The models determine the sequence of a firm's entry into the market and methods of internationalization. Opportunities such as franchising (associated with relatively lower risk, the ability to cover and control a larger market share), licensing (characterized by lower investment and the ability to significantly control the market), strategic alliance and other market transactions are not taken into account. The model also does not determine the motives for internationalization and the factors that determine the exact order in which a company enters a foreign market.
Dunning's eclectic paradigm (The ownership-location-internalization theory (OLI), 1988) describes the conditions under which it is profitable for a company to begin international activities by making foreign direct investment rather than exporting products. Models of company internationalization
http://www.webstarstudio.com/marketing/theor/gos/48.htm. According to the model, a company must have three advantages to make foreign investments:
- - advantage of ownership (as a consequence of owning more profitable tangible and intangible assets). Monopolistic position of the company, resource availability, possession of patents, trademarks, etc.
- - location advantage (as a consequence of the economic characteristics of another country). Relatively low cost of production factors, product sales, guarantee of property protection, etc.
- - the advantage of internalization (as a consequence of production within one company).
According to the theory, a firm engages in international activities with three interrelated conditions. The company has distinctive advantages or specific factors in relation to its foreign competitors that contribute to its competitiveness. The company has a specific location factor that allows it to benefit more from using assets abroad than in its home market. It is more profitable for an enterprise to use existing advantages independently rather than sell or lease them to another company. The theory is based on the premise that internationalization is driven by a company's desire to exploit existing resources in large markets and gain access to new assets. From the theory it follows that only an enterprise with sufficient resources is capable of internationalization. Also, foreign investments of such a company are directed to countries with a similar or lower level of economic development.
Theories suggest that companies enter foreign markets with competitive advantages, which are sufficient to cover the additional costs and risks associated with foreign operations. The considered theories of internationalization were developed by economists using examples of Western companies. Firms from developed countries have stronger competitive advantages in the home market before entering into foreign economic activity. Also, the main motive for the international activities of such companies is the relatively small national market. The dominant factor in starting foreign economic activity is the desire to sell excess resources and existing assets of the company. According to theories, it is difficult to explain the internationalization of companies in developing countries, because they enter the markets of both developing and developed countries, without having specific resources and competitive advantages in domestic markets.
The successful example of companies pursuing different motives and goals of internationalization changes the understanding of the internationalization process. Businesses may move more quickly from one method to another, or skip one step in the internationalization process. An example is the foreign economic activity of the Chinese company Huawei, discussed below.
Economists try to explain the phenomenon of MNCs in developing countries using various theories of business internationalization. Companies are entering the markets of developing countries because... have comparative competitive advantages relative to domestic companies and MNCs from developed countries (Wells, 1981). These advantages include: 1) no need to use specialized equipment, which allows the use of any other equipment in production at lower costs; 2) production of standardized products, the release of which does not require additional capital investments; 3) FDI by affiliates of developing countries is less diversified, which contributes to economies of scale; 4) the elasticity of investments allows you to quickly respond to changes in the business environment in the country, due to their non-specificity and universality. Advantages also include the average scale of operations and cheap labor of companies in developing countries (Ghymn, 1980; Khan, 1986).
According to another economist, the advantages of enterprises in developing countries are based on the ability to: 1) reproduce and adapt foreign technologies in accordance with the market conditions of the host country; 2) carry out developments that are applicable in a given economy, using lower R&D costs; 3) modernize old technologies. (Kumar, 2007).
According to the theory of advantage, enterprises in developing countries invest in economies that are similar in cultural, economic and technological levels. Consequently, a company can expand the scope of its activities to regions that are more remote in geographical, cultural, and technological aspects only when it has adopted international business experience, acquired the necessary skills and modern technologies, and established international connections.
Applying the above theories to companies in developing countries, we can conclude that:
- - the company carries out FDI only in countries with similar or less developed economies;
- - an enterprise can invest abroad only after it has achieved a strong competitive position in the home market and has excess resources.
The theories listed above are applicable to investment in developing countries, but do not explain the nature of Chinese investment in developed economies.
The development of telecommunications, infrastructure, and production technologies are changing the business environment and requiring faster and better strategies for companies. Cultural, economic, social barriers are being erased, and foreign economic activity is evolving. Tony Zohari, The Uppsala Internationalization Model and Its Limitation in the New Era, June 21, 2012.
1.2 Features and motives for the internationalization of companies in developing countries
Enterprises in developing countries have specific advantages, such as assets such as low labor costs, but lack innovation, productivity, market power, technology or brand. The internationalization of such companies is mainly aimed at acquiring missing assets for quick access to foreign markets and strengthening the company's position in the domestic market. For example, Chinese enterprises strive for global research activities to improve their knowledge and create development opportunities abroad, overcoming the restrictions of national legislation and the country's business environment. Such restrictions include: regional protectionism (constrains the development of an enterprise and prevents economies of scale from being achieved); limited opportunities access to capital; insufficient development of intellectual property rights (impedes access to modern technologies); insufficient funding educational institutions(unskilled labor resources); weak infrastructure (high transport costs), etc. Wei Huang, Internationalization of Chinese firms: A case study of Huawei Technologies Ltd., 2006
Many companies have followed a global development strategy since the beginning of their existence. Enterprises simultaneously enter different foreign markets, both to export their products and to acquire new assets. Assets include: technology, know-how, research and development, human capital, brand, consumer loyalty, distribution channels, management experience, natural resources.
This company strategy is determined by the development of technological production, transport and communication infrastructure, and the increasing influence of global market players. Trade liberalization leads to tougher competition in the domestic enterprise market.
The concept of companies born for the global market (“Born Global”, Rennie, 1993) suggests two types of enterprises Karlsen, S. M. F. (2007), The Born Global Redefined. On the Determinants of SMEs Pace of Internationalization, Dissertation to BI Norwegian School of Management, p. 46-57.
The first group includes firms founded for the domestic market (domestic-based firms). Good presence in the local market, significant financial and resource capabilities, good product portfolio. The activities of such companies are mainly focused on the domestic market. On average, international activity for such companies begins in the 27th year of existence, and sales abroad account for about 20% of the company's total sales.
Another group of companies is focused on the global market (born global firms). On average, in the second year of its existence, the company achieves more than 70% of export sales. Such enterprises can withstand the competition of large international companies due to the quality and creation of additional value of their products. By using innovative technologies and developing new designs, firms strive to understand and satisfy the needs of foreign consumers. Companies compete in niche markets and are distinguished by their flexibility and ability to quickly reorient production.
As opposed to staged development, enterprises can pursue an active internationalization strategy. By creating alliances to promote marketing, sales, production, and acquisition of assets, companies create additional value for their product. Let's consider several motives for foreign economic integration of companies in developing countries.
The desire to acquire foreign resources through global cooperation.
Examples of companies from developing countries expand the understanding of business internationalization. Businesses that entered the market late and are trying to catch up with their competitors. The company is distinguished by the following characteristics: 1) historically, it entered the industry market late; 2) initially the company has a weak resource endowment; 3) the main goal of the company is to catch up with its competitors; 4) the company has certain competitive advantages, for example, low costs. The model is especially relevant for the high-tech industry, where knowledge is the main asset. Low costs provide few benefits, and networking strategies and taking advantage of existing market conditions are key. Examples include companies in countries such as Taiwan, South Korea, Singapore, etc.
The model (The linkage, leverage and learning, Mathews, 2006) describes the foreign investment strategy of companies that enter the market later than their competitors Mathews, J.A. (2006) Dragon Multinationals: New Players in 21st Century Globalization, Asia Pacific Journal of Management, 23 , p. 5-27. The basis is the creation of global connections, capitalizing on existing competitive advantages, applying new knowledge and technologies, and creating new competitive features of products. Internationalization promotes the creation of new enterprise assets, and is not an opportunity to use existing competitive advantages.
Companies use foreign investment (creating business connections, using existing market conditions, applying foreign experience) as a way to overcome the lack of competitive advantages. By constantly interacting with foreign companies or organizations within the country or abroad, the enterprise acquires opportunities for technological development, gains access to market information, acquires modern equipment, and participates in the creation of new knowledge and technologies. However, the company's activities are focused not on acquiring new knowledge, but on quickly adapting existing technologies.
Companies in developing countries use the method of internationalization of research activities to achieve competitive advantages and modern technologies. Enterprises pursue the following motives: 1) improving the product, production process, components for foreign markets, providing technical support to production units abroad; 2) following and monitoring the dynamic development of foreign technologies; 3) improvement of the main product and key technologies of the company.
The global competitive environment determines the internationalization strategy.
A global oligopolistic market can influence how and where an enterprise's investments are directed. The company can simultaneously develop its presence in the markets of developed and developing countries. Economists pay attention to the factor of oligopolistic competition (Dunning and Pitelis, 2004) Suma Athreye, Weifeng Cheng (2010). Go west for fame and fortune? The role of internationalization in the growth of Chinese telecom firms, p.6.
Companies in developing countries have to develop innovative technologies to enter the global market. The company strives to create or find a niche in the market unoccupied by world leaders. The company is looking for opportunities to join the strategy of a large MNC. By licensing new technologies, creating joint ventures, and strategic alliances, the company acts as a kind of “beneficial addition” in the development of a foreign company. The model for creating international business connections allows new players to take their place in the global market without having specific knowledge, technologies or resources. Cooperation with a company from a developing country is beneficial to a foreign enterprise. By saturating the market, the firm is able to take advantage of the host country's financial and non-financial programs and Chinese government programs.
The company is actively increasing its presence in developing countries, using its main asset - the ability to establish relatively cheap production. Gradually increasing its competitiveness, increasing production volume, building a positive reputation, the enterprise strives to overcome institutional restrictions and trade barriers on the way to independently entering the markets of developed countries.
Competition and the desire for a larger market share determine one or another method of internationalization. The company decides whether it should cooperate with its main competitors, or accumulate assets in the international market to achieve competitive struggle. In an oligopolistic market, the situation is presented in Table No. 2.
Table No. 2
Oligopolistic market and internationalization strategies.
In the first case, the company strives to acquire the necessary resources through cooperation with competitors in the foreign market and avoids direct competition.
The third square represents a situation where a company cooperates with Western MNCs in the domestic market. This allows you to use national innovation centers and the main competitive advantages of the enterprise: the ability to hire labor relatively cheaply and participate in national programs to support the industry.
In quadrant 2, the company's strategy includes competition with foreign companies. In the global market, companies from developing countries face fierce competition from leading brands.
In the fourth square of the table, companies face serious competition in the domestic market. The enterprise competes with global industry giants and domestic rivals for national resources (capital, human labor) in the market of a developing country. Many companies use their domestic manufacturing centers to produce complementary components, semi-finished and finished products for international operations. The use of domestic production centers of the company is beneficial from the point of view of favorable national legislation and relatively lower costs. At the same time, when a company reaches a certain level of global sales, it reorganizes its production schemes and reduces the share of supplies from the domestic market. Global competitors face greater restrictions and tax burdens as foreigners in a developing country's market.
The integration processes described in the table help to understand the process of internationalization of companies in developing countries and their competition with world leaders in an oligopolistic market.
Investments of companies can be directed to both developing and developed countries. The theories of internationalization presented in the first chapter describe situations where a company seeks to invest in a country with a similar or weaker level of economic development, and only after it has been able to achieve a competitive advantage in the domestic market.
To explain the increasing investments of companies in the economies of developed countries, we will abandon two premises: 1) companies in developing countries invest only in economies that are similar in level of development or less developed; 2) companies can invest abroad only after they have achieved a strong competitive position in the home market. The model will help to understand how a company decides where it is profitable for it to invest Adele Parmentola, “The Internationalization Strategy of New Chinese Multinationals: Determinants and Evolution,” International Journal of Management, Vol.28 No.1 Part 2 Mar 2011, p. 375-377.
To analyze the motives of FDI companies, we introduce two characteristics:
- - level of competitiveness of the enterprise in the home market;
- - level of socio-economic development of the country of investment.
The first factor determines the company's competitiveness in relation to competitors in the home market. A company achieves a strong competitive advantage when it becomes a leader in the domestic market.
Another factor determines the localization characteristics. Opportunity to acquire resources and knowledge when implementing FDI. In particular, the level of socio-economic development is higher in developed countries, due to the availability of skilled labor, specific knowledge, innovative practices, and factor productivity.
The level of economic development in different regions of the country may differ.
Using the above characteristics, four factors that determine FDI can be identified. (Table No. 3)
- 1. The benefits of localization can be applied to large MNCs that have achieved significant competitive positions in the home market and are undertaking FDI in developing countries with the aim of exploiting the resources of the host country. Increasing market share, acquiring cheaper resources.
- 2. Global leadership strategy. A company with a stable position in the home market invests abroad to achieve international competitiveness. The growth strategy is not aimed at acquiring cheaper resources or expanding the sales market, but at acquiring new managerial and technological knowledge. Firms recognize that, in addition to the home market, they need continuous technological improvement to maintain their competitiveness.
- 3. Strategy for acquiring knowledge. Companies are forced to enter foreign markets due to high costs and competitive pressure in the home market. An enterprise invests in a country characterized by high level socio-economic development in order to acquire strategic assets necessary to strengthen competitive positions in the home market. The internationalization strategy is temporary, because after its adaptation and receipt of the necessary resources, the company leaves the foreign market and completely concentrates on the domestic market.
- 4. Strategy for using differences in technological development of the market. The company is forced to enter the foreign market because it cannot develop in the domestic market. Investments are directed to countries with a low level of socio-economic development, where the enterprise can use available resources. Internationalization is defensive.
The proposed model can be considered in dynamics, i.e. Over the course of its life cycle, a company can change its development strategies. (Table No. 3 shows arrows indicating possible changes in company strategies). For example, enterprise internationalization may be a consequence of a knowledge acquisition strategy. After achieving its goal and strengthening its position in the home market, the company can refocus on a strategy of differentiating competencies and implement FDI in less developed countries where it can dominate the foreign market.
Table No. 3
Theoretical foundations of internationalization theory
telecommunications market internationalization China
Thesis
Andreeva, Olga Sergeevna
Academic degree:
Candidate of Economic Sciences
Place of thesis defense:
Saint Petersburg
HAC specialty code:
Speciality:
World economy
Number of pages:
Chapter 1. Theoretical aspects of the process internationalization retail companies
1.1. Retail companies as one of the subjects of the global economy
1.2. Foreign market as one of the directions of the growth strategy of retail companies
1.3. Theories of internationalization of retail companies
Chapter 2. Country aspects of internationalization strategies of retail companies
2.1. Analysis of the international retail market
2.2. The Chinese market as one of the directions for internationalization of retail companies
2.3. Strategies for foreign retail companies to enter the ^^ Russian market
Introduction of the dissertation (part of the abstract) On the topic "Internationalization strategies for retail companies"
Currently, more and more companies are deciding to enter the markets of foreign countries. However, if until the mid-1980s, firms entering foreign markets were predominantly manufacturing, then since the late 1980s, more and more retail companies have begun to decide to move their business beyond national borders.
The retail market is one of the largest markets in the world. The volume of retail trade in the world in 2005 amounted to 11.1 trillion. dollars and this indicator tends to increase (see Appendix 1).
Retail companies first began entering the markets of foreign countries in the late 1940s, but only in the late 1980s did this phenomenon become widespread. For a long period, in almost all countries, the retail sector was considered as an intermediate link between manufacturing companies and the final consumer, and its main function was to provide intermediary services for the delivery of goods to the final consumer within this connection. The situation changed in the early 1980s, when the process of consolidation of retail companies and strengthening their positions began. The retail economy sector is beginning to play an increasingly important role in the market, dictating its requirements not only to individual manufacturing companies, but also to entire industries.
Currently, managers of retail companies are increasingly beginning to understand that in order to increase the company's growth rate in modern conditions, it is necessary to expand its activities beyond the borders of their country. As statistics show, the average growth rate of retail companies operating internationally in the period from 2000 to 2004 was more than 18% per year, while national companies - less than 10% per year2.
1 World consumer goods and retail outlook // Consumer Goods Forecast World. EIU: Economist Intelligence Unit, February, 2006.-p. 18
2 Global Retail Concentration // Retail Planet Report, September, 2006
Currently in Russia, in the context of the development of a market economy, it is necessary to monitor the experience accumulated by foreign companies in order to successfully apply it in our market. In addition, given the increasing interest of foreign retail firms in Russian market, understanding the basic principles of their development and strategies will allow Russian companies, on the one hand, to successfully resist foreign competitors in the domestic market, on the other hand, to adopt their experience and subsequently use it in the markets of foreign countries.
Problem internationalization retail trade is also reflected in the economic literature. Since the 1980s, a separate direction has appeared in the general theory of internationalization, considering internationalization retail. This direction developed on the basis of already existing theories, but had its own specifics associated with the peculiarities of the process of internationalization of retail companies.
In modern scientific literature, foreign authors consider such issues as the reasons for the internationalization of retail trade (Alexander N., Williams D., Dunning J., Levy M., etc.); internationalization strategies of retail companies (Burt S., Dousan J., Tredgold A., Evans J. et al.); issues related to the scale and direction of internationalization of retail firms (Davis K., Clark I., Pellegrini L., Robinson T. et al.). General problems of the development of the international retail trade market in various regions of the world are considered by such scientists as McGur P., Hovey S. et al.
Among domestic authors who address in their works issues related to internationalization retail companies can be noted Vorobyova I.V., Kramareva A.N., Trofimenko O.Yu., Khasis L.A. and etc.
General issues of the internationalization of the company are reflected in the works of such Russian scientists as Gerchikova I.N., Efimova E.G., Kokushkina I.V., Kuznetsova N.P., Lidvanova L.I., Mayzel A.I., Murtuzalieva S.Yu.,
Pivovarov S.E., Popov V.M., Survillo V.G., Sutyrin S.F., Filippov P.N., Cherenkov V.I., Cherkasov N.A. and etc.
When writing the dissertation work, regulatory and legislative documents of the Russian Federation and foreign countries were also used; data international organizations; data Federal service state statistics of the Russian Federation; statistical materials on foreign countries; materials of scientific and practical conferences and seminars; materials from periodicals (“Vedomosti”, “The Economist”, “Harvard Business Review”, “International Journal of Retail & Distribution Management”, etc.).
A feature of currently existing research on internationalization strategies of retail companies is that they are still mostly descriptive in nature and do not address the causes and essence of this process. Thus, the complexity and diversity of the issue related to the internationalization strategies of retail firms require its further theoretical and practical development.
The entirety of the dissertation is to analyze the internationalization strategies of retail companies, as well as to identify the characteristics and development trends of these companies.
To achieve the goal, the following tasks are set:
Determining the role and place of retail companies as one of the subjects of the global economy;
Systematization and analysis of theoretical aspects of the internationalization of retail firms;
Identification of the reasons that encourage retail companies to enter the markets of foreign countries in comparison with manufacturing firms;
Determining the specifics of strategies for entering foreign markets of retail companies in comparison with manufacturing companies;
Conducting an analysis of the international retail market;
Studying the functioning of the Chinese retail market and identifying how the characteristics of this market affect the strategies for entering it by foreign retail companies;
Assessment of the current state and development trends of the Russian retail trade market and analysis of strategies for entering this market of foreign retail companies.
The object of the study is retail companies as one of the main participants in the modern system world economic relationships. The subject of the study is the internationalization strategies of retail firms.
The scientific novelty of the dissertation research is as follows:
2. It has been proven that determining the format of a retail company is the mechanism through which it realizes a competitive advantage in the market, including foreign ones (pp. 23-28);
3. The reasons that motivate a retail company to the process of internationalization are specified and systematized, and their specificity is identified in comparison with the reasons for manufacturing companies entering the foreign market (pp. 35-41; 43)
4. The eclectic theory of J. Dunning is highlighted as the theory that best explains the process of internationalization of a retail company (pp. 65-71);
5. Features of the development of the Chinese retail market are identified, which influence the strategies for foreign retail companies to enter it (p. 93110);
6. Based on an analysis of the development of the retail trade market in the Russian Federation, the factors determining the choice of strategy for foreign retail firms to enter it are identified (pp. 113-129).
The practical significance of the study lies in the fact that the work contains theoretical concepts and analytical assessments can be used in drawing up business plans for retail companies, as well as for analyzing and forecasting the development of the international retail market and the retail market of the Russian Federation.
Theoretical and analytical research materials can be used in teaching courses in such disciplines as “World Economy”, “ international trade », « International economic relations", "International Marketing", " Marketing of a trading company" and etc.
The first chapter of the study examines the theoretical aspects of internationalization strategies of retail companies. The author's definition of international retail trade, an international retail company is presented, the role and place of retail companies in the global economy are determined, and the specifics of a retail company as a subject of the international services market are highlighted.
Criteria for the classification of retail companies have been identified and, based on these criteria, the formats of retail companies presented in the scientific literature have been systematized. Based on M. Porter's theory of competitive advantages, a definition of the format of a retail company as a mechanism through which it realizes a competitive advantage in the market, including foreign ones, is proposed and proven.
The definitions of a company's strategy currently existing in the scientific literature are considered. Based on I. Ansoff’s “product-market” matrix, the retail company’s entry into the foreign market is defined as an integral part of one of the company’s growth strategies. An analysis of the competitive advantages that each of the considered strategies provides to a retail company is carried out.
The reasons why the management of a retail company begins to consider expanding beyond its home country as a growth strategy for the company are clarified and expanded. The specificity of the reasons prompting retail companies to transfer their activities beyond national borders in comparison with manufacturing companies is determined.
An analysis of ways for retail firms to enter foreign markets has been carried out. The factors influencing the choice of a retail company's method of entering the foreign market are clarified. The possibility of determining the format of a retail company as one of the factors influencing the choice of method of entering the markets of foreign countries is proposed and considered.
The analysis of two main directions of theories of company internationalization (Eclectic theory of Dunning J. and the theory of stages) was carried out and the theory most suitable for explaining the process of internationalization of retail companies was identified.
The second chapter of the dissertation examines country-specific aspects of internationalization strategies of retail companies. An analysis of the international retail market was carried out and the trends characteristic of this market at the present stage were clarified.
The characteristics of the Chinese retail market are presented as one of the priority areas for the internationalization of retail companies at the present stage. Within the framework of Dunning J.'s eclectic theory, an analysis of the reasons motivating retail companies to enter this market was carried out, the structure and specifics of the Chinese retail market were determined, influencing the choice of strategy for foreign retail companies to enter it.
An analysis of the formation and development of the Russian retail market was carried out. The main trends currently existing in the Russian market have been identified, and prospects for its development have been determined. The factors that determine the choice of this market as one of the directions for the internationalization of retail companies are identified, and they are compared with the factors that determine the entry of retail companies into the Chinese market. Issues related to strategies for entering the Russian market of foreign retail companies are considered, and factors influencing the choice of these strategies by retail companies are identified.
The main provisions and conclusions of the dissertation research were tested at the 2nd international scientific and practical conference "" (May 12-13, 2003, St. Petersburg); All-Russian Conference of Young Scientists and Economists "" (April 2324, 2004, St. Petersburg); International scientific and practical conference " Current state and prospects for the development of the international trading system" (April 15-17, 2004, St. Petersburg); 5th international scientific and practical conference " Current problems of economics and new teaching technologies"(May 14-15, 2006, St. Petersburg).
1. The Russian retail market as one of the directions for the development of international retail companies // Materials of the 2nd international scientific and practical conference " Current problems of economics and new teaching technologies" St. Petersburg: MBI, 2003 (0.1 pp.)
2. Attractiveness market of St. Petersburg for foreign retail companies // Current problems of economic science. Collection of scientific articles by doctoral students and graduate students of the Faculty of Economics of St. Petersburg State University. St. Petersburg: OTSEiM, 2004 (0.32 pp.)
3. Russian retail market in the international expansion of Wal-Mart: Western European or Asian development option? // Materials of the All-Russian Conference of Young Scientists and Economists " Youth and economic development modern Russia" SPb.: Publishing house. Faculty of Economics, St. Petersburg State University, 2004 (0.21 p.p.)
4. China’s accession to the WTO: consequences for the retail market // Current state and prospects for the development of the international trading system. Materials of the international scientific-practical conference / ed. IN AND. Kapustkina. St. Petersburg: OTSEiM, 2004 (0.35 pp.)
5. Internationalization and its impact on the Russian retail market // Materials of the 5th international scientific and practical conference " Current problems of economics and new teaching technologies" St. Petersburg: MBI, 2006 (0.09 pp.)
6. The Chinese retail market as one of the directions of internationalization of retail companies // Bulletin of ENGECONA. Series: Economics, Issue 4 (13). St. Petersburg: SPbGIEU, 2006 (0.30 pp.)
Conclusion of the dissertation on the topic "World Economy", Andreeva, Olga Sergeevna
Drawing conclusions from Chapter 1, we can say the following. Retail companies, as one of the subtypes transnational corporations are subjects of the global economy, and, in particular, the international services market. The services provided by retail firms in foreign markets are understood to include purchasing and further resale to the end consumer of a certain assortment of goods, as well as providing him with additional services related to the selection, purchase and after-sales service of this product.
An analysis of the various types of retail firms presented in the scientific literature allows us to identify a number of criteria by which their classification can be carried out, the main of which are the following: the size of the trading enterprise, the quantitative and qualitative characteristics of the assortment
138 http://www.rbcdaily.ru/2006/] l/28/world/251532; http://www.e-xecutive.ru/news/piece18776/
139 http://news.bbc.co.Uk/2/hi/business/6385267.stm; http://news.bbc.co.Uk/2/hi/business/4540255.stm goods, and the scope of services provided. The set of these criteria in their various variations can be used as the basis for determining the format of a retail company.
Determining the format of a retail company is an important point in considering strategies internationalization retail companies, since it is the format, as a set of a number of characteristics that the company possesses, that is the mechanism through which it realizes a competitive advantage in the market, including foreign ones.
Determining the place of internationalization of retail companies in the overall growth strategy of retail companies can be carried out on the basis of the “product-to-market” matrix developed by Ansoff I. Within the framework of this matrix, taking as a basis criteria for company growth such criteria as trade format and target segment consumers, there are four growth strategies for retail firms: market deepening, market development, market expansion and diversification. The last two strategies, as components, include entering the markets of foreign countries.
An analysis of strategies in the context of M. Porter’s theory of competitive advantage showed that it is easier for retail companies both in the domestic and foreign markets to achieve success by adhering to strategies that do not involve the introduction of new trade formats (deepening and expanding the market).
The main reasons that recently an increasing number of companies are choosing to enter the foreign market as one of their growth directions are the following: slowdown in the growth rate of national markets; increased competition in the domestic market, as well as consolidation and strengthening of the positions of retail companies.
The main specificity of the process of internationalization of retail companies is that the time lag between their founding and expansion beyond the borders of their home countries is greater than that of manufacturing companies due to the fact that for retail companies the process of development in the domestic market, as well as obtaining a strong position in it, is more an important and necessary condition for successful entry into foreign markets.
The main difference between the internationalization process of retail companies and manufacturing firms is that for retail companies, “pear” factors prevail as the reasons for entering foreign markets. However, it has been revealed that at the present stage of development of the international retail market, “pi11” factors are beginning to play an increasingly important role in the reasons for the internationalization of retail companies. A feature of the internationalization of retail firms is also the possibility of using more risky and demanding financial resources ways to enter foreign markets.
The choice of method for a retail company to enter the foreign market depends on a number of reasons, one of which is the format in which the company operates in the domestic market, as well as the possibility of maintaining this format, within which certain competitive advantages are realized, when entering the foreign market.
Establishing a retail enterprise in a foreign market “from scratch” (within the framework of an investment model) is used by companies developing either an innovative format of a retail enterprise or a format that is new to the market they are planning to enter, and maintaining this format with minimal changes, which helps the company realize to the maximum extent the competitive advantages inherent in this format.
Entering a foreign market by purchasing a company operating there (as part of an investment model) is used by companies developing such formats as discounters, wholesale clubs, cash & carry stores, hypermarkets and, in some cases, supermarkets. To maintain the advantages that these formats bring in the foreign market, the company needs to ensure as much presence as possible on it in a fairly short time in order to maintain the possibility of following a cost leadership strategy, which can be accomplished as quickly as possible by purchasing an existing company on the market .
Entering a foreign market by establishing a joint venture (within the framework of an investment model) is used by companies developing formats through which a strategy of concentration on a specific segment is implemented (specialty stores, “ product category killers"), as well as formats aimed at minimizing costs (discounters, wholesale clubs, cash & cash stores, hypermarkets). Moreover, this strategy is applied, first of all, either in the presence of any legislative restrictions on the market, or in markets that are complex in terms of structure, or if the company does not have sufficient quantity funds to organize your own enterprise.
Entering the foreign market by concluding a franchising agreement (within the framework of a licensing model) is most used by companies operating in the format of specialized stores, “ convenience stores”, as well as companies that have some other, in some cases innovative, format, within the framework of which they implement unique “know-how”, that is, to implement this strategy, the company must have either a strong brand, recognizable in the foreign market, or advanced trading technologies.
The growth of the internationalization process of retail companies is reflected in the economic literature. Since the 1980s, a separate direction has appeared in the general theory of internationalization, considering internationalization retail companies. This direction developed on the basis of existing theories, but had its own specifics associated with the peculiarities of the process of internationalization of retail companies.
An analysis of two theories of company internationalization (stage theory and J. Dunning's eclectic theory) showed that the most suitable theory for explaining the process of internationalization of retail firms is J. Dunning's theory.
Stage theory was widely used to explain the internationalization process of retail firms in the 1980s and early 1990s, however, as research has shown, the theory successfully explains only the earliest stages of this process. At the present stage, retail companies tend to enter the markets of countries, to a greater extent, not with similar cultural factors or geographic proximity, but with a less developed structure of the retail market and a lower level of competition in the format in which the company operates than in the home country.
In this case, the eclectic theory of J. Dunning compares favorably with the theory of stages precisely in that it allows for a comprehensive analysis of factors that takes into account how the competitive advantages that a company realizes through operating in a particular format (ownership advantages) can be maximized implemented on the foreign market, taking into account the inherent characteristics of this market (location advantages). At the same time, the company's benefits when investing in this market should be more significant than when entering it through franchising (benefits of internationalization).
An analysis of the internationalization of the American company Wal-Mart from the point of view of its compliance with the eclectic theory of J. Dunning showed that all the conditions of this theory were met, which suggests the possibility of using this theory to explain the process of internationalization of retail companies.
The theoretical components of the process of internationalization of retail companies discussed in the first chapter, in addition to the analysis of scientific literature, are also based on a study of the practical aspects of the process of internationalization of retail companies into the markets of foreign countries. In the second chapter of the dissertation research, the theories and hypotheses put forward in the first chapter will be considered within the framework of the analysis of the international retail market, as well as a study of the process of internationalization of retail companies that have entered the markets of China and Russia as one of the highest priority areas for expanding the international activities of retail firms in modern stage.
Chapter 2. Country aspects of retail internationalization strategies
2.1. Analysis of the international retail market
The retail trade market is currently one of the most dynamically developing in the world. The volume of retail trade in the world in 2005 amounted to 11.1 trillion. dollars, and this indicator tends to increase1"111.
An analysis of the distribution structure of retail sales by region of the world shows that the largest volume currently accounts for the North American region. Asia is in second place, Western Europe is in third (see chart 1).
Shares of regions in global retail trade turnover (2005)"41
Western Europe
Eastern Europe
North America
Latin America
Australia and Oceania
The largest, both in terms of its share in global retail turnover and in terms of such an important indicator for the retail trade market as retail sales per capita, is the North America, and, in particular, the US market (see table 3)m\
141 World consumer goods and retail outlook // Consumer Goods Forecast World. OIL): Economist Intelligence Unit, February, 2006. - p. 18
14 Retail Trade International. Euromonilor Report, 2006. - p.24-27
142 The US market accounts for 95% of all retail sales in this region (World consumer goods and retail outlook // Consumer Goods Forecast World. EIU: Economist Intelligence Unit. February. 2006. - p. 18)
Conclusion
Currently, an increasing number of companies are deciding to enter the markets of foreign countries. However, if until the mid-1980s, firms entering foreign markets were predominantly manufacturing, then since the late 1980s, an increasing number of retail companies have decided to move their business across national borders.
An international retail company is proposed to be understood as a company that offers goods and services to end consumers in the markets of two or more countries and implements a coordinated policy and a common strategy for subordinate retail enterprises.
International retail companies act as one of the participants in the international services market, in particular, the international retail trade market. International retail trade refers to the process of selling goods and services in the markets of foreign countries to their end users, which can be both individual buyers and small wholesale consumers purchasing goods for non-commercial use.
The very process of selling goods by retail companies as participants in the services market will consist in the retail company offering the final consumer in a foreign market a certain assortment of goods. Quantitative and qualitative characteristics of the assortment, as well as Additional services to support the process of selling this product to the consumer directly depend on the format in which the company operates in this market.
Determining the format of a retail company is a key point in considering the internationalization strategies of retail companies, since it is the format, as a set of a number of characteristics inherent in the company, that is, in fact, the mechanism through which a retail company realizes a competitive advantage in the market, including foreign ones.
Based on Porter M.’s theory of competitive advantage, it has been determined that retail companies can use the following strategies to gain competitive advantage by operating in selected formats: cost minimization strategy (used by discounters, hypermarkets, wholesale clubs, cash & carry stores, supermarkets) , a differentiation strategy (used by department stores; convenience stores; showroom stores selling from catalogues, as well as some specialized companies) and a concentration strategy (used by “category killer” companies and some specialized companies). In conditions of high saturation of the retail market and fierce competition between stores of the same format, in some cases retail firms can also use a combination of these strategies to achieve success.
Determining the place of internationalization of retail companies in the overall growth strategy of retail companies can be carried out on the basis of the “product-to-market” matrix developed by Ansoff I. Analysis of the strategies outlined within this matrix in the context of M. Porter’s theory of competitive advantages showed that retail companies as It is easier to achieve success in both the domestic and foreign markets by adhering to strategies that do not involve the introduction of new trade formats (deepening and expanding the market).
The main reasons why many retail companies choose to enter the foreign market as one of their development directions are the slowdown in the growth rates of national markets (primarily the markets of Western Europe and the USA), increased competition in the domestic market, as well as the consolidation and strengthening of positions of retail companies within the chain “production company - wholesale company - retail company - consumer”. At the same time, the entry of retail companies into the foreign market became possible only if a number of necessary conditions were met, the main of which were the company achieving the required scale of activity and obtaining the opportunity to attract additional sources of financing; expanding presence in the domestic market; gaining knowledge about the foreign market.
Unlike manufacturing companies, for retail companies the group of “ri511” factors prevails as reasons for entering foreign markets. However, it has been revealed that at the present stage of development of the international retail market, “pi11” factors are beginning to play an increasingly important role in the reasons for the internationalization of retail companies.
A specific feature of the internationalization of retail firms, which also explains the reason for the longer time lag between the founding of a company and its entry into a foreign market than for manufacturing firms, is also the possibility of using more risky and more financially resource-consuming methods of entering a foreign market.
A study of the process of retail companies entering some of the most attractive for them, at the present stage, the markets are the markets of Russia and China, within the framework of the eclectic theory of J. Dunning, it made it possible, on the one hand, to provide an analysis of how the features of these markets affect the strategies of retail firms entering them. On the other hand, this made it possible to determine this theory as the most suitable for explaining the process of internationalization of retail companies at the present stage.
The advantage of J. Dunning’s eclectic theory was that it allowed for a comprehensive analysis of factors, taking into account how the competitive advantages that a company realizes through operating in one format or another (ownership advantages) can be realized to the maximum extent in the foreign market, taking into account characteristics inherent in a given market (location advantages). At the same time, the theory takes into account the fact that the benefits of companies when investing in this market were more significant than entering it through franchising (benefits of internationalization).
Within the framework of this theory, it was revealed that entering the Russian market and
China has become possible for retail firms due to the availability of all types of advantages.
The advantages of the location for both countries were the improvement of the economic and political situation in the country, the high rate of development of the retail trade market, its low level of saturation and a weak degree of competition in it. In the case of the Chinese market, the determining factors were also the huge population size, as well as the elimination of restrictions on the activities of foreign companies in the retail market after the country joined the WTO.
The main advantages of ownership were, first of all, the very formats of the retail enterprises in which the companies operated. A factor contributing to the successful implementation of these advantages was the peculiarity of the structure of the retail markets of China and Russia, in which a large share was occupied by unorganized forms of trade. At the same time, the determining factor was also the time factor. For the Chinese market, the importance of this factor was specifically noted, taking into account the need to adjust retail trade formats by foreign companies to bring them into line with the high specificity of demand in the local market.
Large foreign companies, when entering both the Chinese and Russian markets, placed the main emphasis on the development of large-format trading enterprises (hypermarkets, wholesale clubs, supercenters, cash & carry stores), in which the companies had the greatest competitive advantages compared to local companies .
However, if in the case of Russia these formats are the most effective for “pulling” part consumer demand from the segment of unorganized forms of trade, for the Chinese market, due to its specifics, this can be done most successfully by smaller formats of retail enterprises (“convenience stores” and supermarkets). Due to greater knowledge of the specifics of local demand, as well as the complex system of Chinese distribution, the strongest positions in the segment of these trade formats are currently occupied by Chinese companies, which is one of the factors determining their strong positions in the local market as a whole, despite the expansion foreign companies.
When studying whether foreign firms have internationalization advantages in the process of expanding their activities into the markets of Russia and China, it was revealed that companies, when expanding their activities into these markets, most use entry models that involve investing in the markets of these countries.
At the same time, in China, due to legislative restrictions, the high specificity of consumer demand and behavior, as well as a complex distribution system, companies predominantly use the creation of a joint venture as a way to enter the market.
In Russia, where these obstacles do not exist, companies largely use the “from scratch” method of organizing a trading enterprise. However, as the market becomes saturated and difficulties arise in finding free territories for setting up a store, foreign companies are increasingly beginning to consider possible way entering the country's market and purchasing an existing company.
When entering both the Chinese and Russian markets, foreign firms are still quite cautious in using the licensing model of entry, in particular, franchising. The main reason for this for both countries is the lack of clear legislation in this area, high risks of copying brands retail companies, their “know-how” and trading technologies, and, as a result, the need for foreign firms to incur high costs associated with the protection of property rights.
Russian retail companies need to monitor the experience accumulated by Western competitors in other countries in order to successfully apply it both in the Russian market and in the markets of foreign countries. Considering the increasingly growing interest of international retail companies in the Russian market, only an understanding of the basic principles of development and strategies of these companies will make it possible to successfully resist them both in the domestic and foreign markets.
List of references for dissertation research Candidate of Economic Sciences Andreeva, Olga Sergeevna, 2007
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