INTERNATIONAL BUSINESS STRATEGIES

Andrey G. Medvedev,

Professor

December 15, 2009MIB Programme

© Andrey Medvedev

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

© Andrey Medvedev

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

© Andrey Medvedev

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 340–350 thousand t of

chocolate per year, from which about a third is covered by the imports.

The advisers recognised that today annual consumption is 1.2–1.7 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 $100–200. The

assumption was made that in 10–15 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.

© Andrey Medvedev

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

© Andrey Medvedev

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?

© Andrey Medvedev

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 co-

operate with its local warehouse.

© Andrey Medvedev

DISTRUBUTION ACTIVITIES:

TIKKURILA

Ramenskoye

Production: Warehouses:

St. Petersburg

Ramenskoe Ramenskoe, Moscow Region,

Kraski Tikkurila

St. Petersburg, Finncolor

Novosibirsk, Kraski Tikkurila

branch

Novosibirsk

Dealers:

more than 60 dealers

St. Petersburg

Strategy, finance, R&D:

Outside Russia

© Andrey Medvedev

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

© Andrey Medvedev

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

© Andrey Medvedev

INTRODUCING GLOBAL BRANDS IN RUSSIA

LANGUAGE OF BRAND

– CYRILLIC LETTERS

– TWO LANGUAGES

IN SOME TERRITORIES

© Andrey Medvedev

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

© Andrey Medvedev

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

© Andrey Medvedev

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

© Andrey Medvedev

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

© Andrey Medvedev

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

© Andrey Medvedev

PERSONNEL MIX FORMATION

PERSONNEL MIX

– HOME COUNTRY NATIONALS (EXPATRIATES)

– HOST COUNTRY NATIONALS (LOCAL STAFF)

– THIRD COUNTRY NATIONALS (COSMOPOLITAN EXPATRIATES)

© Andrey Medvedev

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

© Andrey Medvedev

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

© Andrey Medvedev

TOP COMPANY MANAGERS IN RUSSIA:

KNAUF

GERMANS

CEO

PURCHASES & HR

MARKETING

FINANCE

EXTRACTING TECHNOLOGIES

RUSSIANS

PUBLIC RELATIONS

EQUIPMENT & PRODUCTION

© Andrey Medvedev© Andrey Medvedev

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.

© Andrey Medvedev

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)

© Andrey Medvedev

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.

© Andrey Medvedev

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)

© Andrey Medvedev

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