INTERNATIONAL BUSINESS STRATEGIES

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1 INTERNATIONAL BUSINESS STRATEGIES Andrey G. Medvedev, Professor MIB Programme December 15, 2009

2 INTERNATIONAL MARKETING MANAGEMENT Responsibilities of International Manager: Analyse specific features of the international competition evolution in a relevant industry Select and study foreign markets Apply international marketing tools and formulate an international marketing mix Participate in a process of pricing for products supplied to international markets

3 INTERNATIONAL MARKETING PHILOSOPHIES MARKET EXTENSION PHILOSOPHY INTERNATIONAL MARKETING MARKETING ACTIVITIES CROSSING NATIONAL BORDERS MULTI-DOMESTIC MARKET PHILOSOPHY FOREIGN MARKETING MARKETING ACTIVITIES IN A COUNTRY OTHER THAN ITS HOME COUNTRY GLOBAL MARKET PHILOSOPHY GLOBAL MARKETING CO-ORDINATION, INTEGRATION AND CONTROL OF MARKETING ACTIVITIES

4 STUDYING A MARKET: NESTLÉ In 1993, Nestlé studied an opportunity to start business in Russia. In Europe, where Nestlé is the unconditional leader, the company has 13 percent of the chocolate market. This level was confirmed as a guide to start manufacture and sales of chocolate in Russia. A local adviser firm has evaluated the market size as thousand t of chocolate per year, from which about a third is covered by the imports. The advisers recognised that today annual consumption is kg of chocolate per capita (compare with 11 kg in Switzerland). After comparison with countries with similar climatic conditions (Germany, Scandinavia) the decision was made to have 6.5 kg per person as a final goal. In 1993, the monthly average income per capita in Russia (including that refered to as grey income) was $ The assumption was made that in years, Russia will come nearer to the European level of income (about $1000 per month). Thus, the potential capacity of the market was defined as $990 million per year.

5 PRODUCT STRATEGIES LOCAL PRODUCTS HAVE POTENTIAL ONLY IN A SINGLE NATIONAL MARKET MULTI-DOMESTIC PRODUCTS ARE ADAPTED TO THE UNIQUE CHARACTERISTICS OF NATIONAL MARKETS REGIONAL PRODUCTS HAVE POTENTIAL FOR EXTENSION INTO A NUMBER OF NATIONAL MARKETS GLOBAL PRODUCTS ARE DESIGNED TO MEET THE NEEDS OF A GLOBAL MARKET SEGMENT

6 WHAT ABOUT PAINTS: TIKKURILA Tikkurila is a Finnish-based company operating in paints and coatings sector International activities bring 75 percent of sales Russians like brighter colours of paints Are paints multi-domestic or global product?

7 DISTRIBUTION POLICY: UNILEVER CASE Unilever, an Anglo-Dutch MNC producing consumer goods, does not deal with logistics and distribution in European countries and USA. It either deals with a purchase department of large retailers or with firms that specialise in warehousing and wholesale of consumer goods. In Russia, largest distributor companies concentrate in Moscow and St. Petersburg and are not able to cover the whole country. Mr. Robert Nights, Chief for Logistics Department of Unilever CIS, tells, Our conventional sales system permitted to develop business in Moscow area that accounts for 40 or 45 percent of our turnover. After several years of operation in Russia, a chain of Unilever s distribution centres has been set up all over the country. Each centre is a warehouse to maintain a permanent stock of goods according to the regional demand. While local trading firms made their purchases in the past either at Moscow or St. Petersburg, where Unilever s offices and enterprises are based, now they began to cooperate with its local warehouse.

8 DISTRUBUTION ACTIVITIES: TIKKURILA Production: St. Petersburg, Finncolor Ramenskoe, Moscow Region, Kraski Tikkurila Warehouses: St. Petersburg Ramenskoe Novosibirsk, Kraski Tikkurila branch Dealers: more than 60 dealers St. Petersburg Ramenskoye Novosibirsk Strategy, finance, R&D: Outside Russia

9 GLOBAL BRANDS OPPORTUNITIES TO TAKE ADVANTAGE OF THE WORLD MARKET GLOBALISATION GLOBAL BRAND IS A PRODUCT WITH THE SAME NAME, PERSONALITY, AND POSITIONING IN WORLD-WIDE MARKETS WORLD PRODUCT IS THE SAME PRODUCT WITH DIFFERENT BRAND NAMES IN DIFFERENT COUNTRIES

10 BRANDING: TYPOLOGY IN RUSSIA GLOBAL BRANDS FOR GLOBALLY POSITIONED PRODUCTS FOREIGN (INTERNATIONAL) BRANDS PRE-SOVIET BRANDS ONCE FAMOUS SOVIET BRANDS NEWLY CREATED PSEUDO-RUSSIAN BRANDS NEW RUSSIAN BRANDS NEW PSEUDO-FOREIGN BRANDS

11 INTRODUCING GLOBAL BRANDS IN RUSSIA LANGUAGE OF BRAND CYRILLIC LETTERS TWO LANGUAGES IN SOME TERRITORIES

12 INTERNATIONAL HUMAN RESOURCES MANAGEMENT Responsibilities of International Manager: Define the rules to select staff for subsidiaries Provide international personnel mix formation Provide for training programmes for expatriates and local managers at subsidiaries Integrate remuneration systems for the staff of a parent company, its branches and subsidiaries

13 INTERNATIONAL MANAGER "Ideally it seems he (or she) should have the stamina of an Olympic runner, the mental agility of an Einstein, the conversational skill of a professor of languages, the detachment of a judge, the tact of a diplomat, and the perseverance of an Egyptian pyramid builder and if he is going to measure up to the demands of living and working in a foreign country he should also have a feeling for culture, his moral judgements should not be too right, he should be able to merge with the local environment with chameleon-like ease and he should show no signs of prejudice J. Heller

14 CHARACTERISTICS OF INTERNATIONAL MANAGERS PERSONAL CHARACTERISTICS OF SELECTED MANAGERS COMPETENCE TECHNICAL KNOWLEDGE LEADERSHIP ABILITY EXPERIENCE, PAST PERFORMANCE AREA EXPERTISE LANGUAGE SKILLS ADAPTABILITY INTEREST IN OVERSEAS WORK RELATIONAL ABILITIES CULTURAL EMPATHY APPRECIATION OF NEW MANAGEMENT STYLES APPRECIATION OF ENVIRONMENTAL CONSTRAINTS ADAPTABILITY OF FAMILY

15 RECRUITMENT OF INTERNATIONAL MANAGERS THE PROCESS OF INTERNATIONAL RECRUITMENT IDENTIFICATION OF A VACANT POSITION JOB DESCRIPTION FACTORS OF PERSONNEL SELECTION LOCATION OF THE SUBSIDIARY ORGANISATIONAL CO-ORDINATION AND CONTROL COMPANY SHORT-TERM, LONG-TERM OR PERMANENT GOALS COMPANY MANAGEMENT ORIENTATION (EPRG) COMPANY DEVELOPMENT POLICIES COST FACTORS LEGAL RESTRICTIONS

16 CULTURE AND MENTALITY: CAUSE AND EFFECT CAUSE AS A COMPREHENSIVE RESULT OF THE LONG HISTORY OF RUSSIA (THROUGH THE RUSSIAN EMPIRE TO SOVIET TIMES AND TO CURRENT TRANSITION PERIOD), HUMAN DIMENSION IS EXTREMELY IMPORTANT IN BUSINESS AND MANAGEMENT COMPARED TO THE WESTERN MODEL CONFIDENCE AND TRUST PLAY A GREAT ROLE EFFECT AFTER ACQUISITION OF A RUSSIAN FIRM, FOREIGN MANAGERS OFTEN CANNOT SEE SOME INFORMAL PERSONAL RELATIONS IN THE COMPANY WHICH MAY INFLUENCE THE DECISION-MAKING AND IMPLEMENTATION PROCESS RATHER THAN ORDERS AND PROCEDURES

17 PERSONNEL MIX FORMATION PERSONNEL MIX HOME COUNTRY NATIONALS (EXPATRIATES) HOST COUNTRY NATIONALS (LOCAL STAFF) THIRD COUNTRY NATIONALS (COSMOPOLITAN EXPATRIATES)

18 FACTORS OF PERSONNEL MIX FORMATION HOST COUNTRY CHARACTERISTICS LEVEL OF ECONOMIC DEVELOPMENT, POLITICAL INSTABILITY, NATIONALIST SENTIMENT; FOREIGN INVESTMENT AND IMMIGRATION POLICIES; AVAILABILITY OF QUALIFIED MANAGERS; GEOGRAPHICAL LOCATION; SOCIO-CULTURAL SETTING PERSONNEL CHARACTERISTICS OF MANAGERS LIFE-STYLE, EXPECTATIONS AND AMBITIONS; QUALIFICATIONS AND EXPERIENCE; COMMITMENT TO INTERNATIONAL BUSINESS; WILLINGNESS TO ADAPT AND SENSITIVITY TO PEOPLE FROM OTHER CULTURES COMPANY CHARACTERISTICS OWNERSHIP OF A FOREIGN SUBSIDIARY, METHODS OF EXPANSION, INDUSTRY, TECHNOLOGY, MARKET INFLUENCE

19 STAFFING POLICY ETHNOCENTRIC APPROACH ALL KEY MANAGEMENT POSITIONS ARE FILLED BY PARENT- COUNTRY NATIONALS POLYCENTRIC APPROACH HOST-COUNTRY NATIONALS ARE RECRUITED TO MANAGE SUBSIDIARIES, WHILE PARENT-COUNTRY NATIONALS OCCUPY KEY POSITIONS AT CORPORATE HEADQUARTERS GEOCENTRIC APPROACH THE BEST PEOPLE ARE SELECTED FOR KEY JOBS THROUGHOUT THE CORPORATION, REGARDLESS OF NATIONALITY

20 TOP COMPANY MANAGERS IN RUSSIA: KNAUF GERMANS CEO PURCHASES & HR RUSSIANS PUBLIC RELATIONS EQUIPMENT & PRODUCTION MARKETING FINANCE EXTRACTING TECHNOLOGIES

21 STAFFING POLICY AT BALTIKA BREWERY In 1993, Swedish Pripps and Finland's Hartwall breweries formed the Baltika Beverages Holding, which has controlling stakes in Russia's No. 1 brewer, Baltika, as well as several other breweries. Pripps managing director, Mikael Hellberg, 2000: Our philosophy is as follows: national enterprises must stand on their own two feet. There shouldn't be too many foreigners. At the start, we poured resources into all areas in order to train people. But after a certain amount of time, people must work independently. Management should be local while we, the shareholders, are always prepared to provide financial or technical support.

22 INTERNATIONAL CORPORATE CULTURE CROSS-CULTURAL MANAGEMENT A STUDY AND POSSIBLE EXPLANATION OF CULTURAL DISTINCTIONS (INCLUDING MANAGEMENT STYLES) AMONG VARIOUS NATIONALS A SEARCH FOR EFFICIENT TECHNIQUES TO MANAGE THE RELATIONSHIPS ARISING IN INTERNATIONAL MNC TEAMS (EFFICIENT INTERACTION AMONG FOREIGN AND LOCAL MANAGEMENT)

23 HOUSES FOR WORKERS: NOKIAN TYRES Nokian Tyres has announced the construction of a residential complex for employees at its plant in Vsevolozhsk. Offering affordable housing close to the plant, Nokian Tyres hopes to become an attractive employer. Construction of the complex will cost over $22 million. By 2010, Nokian Tyres will construct seven buildings comprising 270 apartments. They will be sold at cost price. Employees will be able to take a loan from the Leningrad Oblast Mortgage Agency.

24 INTERNATIONAL CORPORATE CULTURE CROSS-CULTURAL MANAGEMENT A STUDY AND POSSIBLE EXPLANATION OF CULTURAL DISTINCTIONS (INCLUDING MANAGEMENT STYLES) AMONG VARIOUS NATIONALS A SEARCH FOR EFFICIENT TECHNIQUES TO MANAGE THE RELATIONSHIPS ARISING IN INTERNATIONAL MNC TEAMS (EFFICIENT INTERACTION AMONG FOREIGN AND LOCAL MANAGEMENT)

25 CONCLUSIONS Beware of international ratings! Many firms may see Russia as a natural place to be in Firms have to evaluate properly opportunities (following the window of opportunity) and threats Different options to enter Russia may be applied Market entry: control of exports is important to compete for markets Industry entry: competition for resources may become a critical factor Reliable business partner is of a great importance Russian managers are enough qualified in many cases Integration of subsidiaries and networking help foreign firms improve their competitiveness Expansion: separate territories differ in legal and economic terms Russia may become a Home Market Abroad for a foreign firm