Ministry of Education of the Russian Federation
St. Petersburg State University of Engineering and Economics
Department of World Economy and International Management
Course work
on the topic: COMPANY INTERNATIONALIZATION STRATEGY
STARBUCKS IN RUSSIA
in the discipline "International Marketing and Strategic Management"
St. Petersburg, 2010
PLAN
| Summary | page 3 | |
| 1. | Project business idea | page 4 |
| 2. | Choice of country markets | page 6 |
| 3. | Choosing a way to enter country markets | page 7 |
| 4. | Choice of consumer segments | page 10 |
| 5. | Determination of marketing goals and strategies | page 11 |
| 6. | Food mix | page 18 |
| 7. | Contract price mix | page 20 |
| 8. | Sales and distribution mix | page 22 |
| 9. | Communication mix | page 24 |
| 10. | Organization and budget of international marketing | page 25 |
| 11. | Strategic plan for international marketing | page 27 |
| Bibliography | page 29 |
Summary
What explains the phenomenal growth and success of Starbucks? One of the most important components of this success is a properly conceived and implemented strategy. Starbucks Coffee Company has grown from a small, regional business to the undisputed world leader in the coffee industry in less than thirty years. The company's growth is significant - starting in 1985 with one cafe, today the number of Starbucks coffee shops is inexorably approaching 17 thousand, and at the same time retaining its original character.
Starbucks is currently experiencing a period of exceptional growth, with a small Starbucks location opening almost every day, somewhere in the world.
As early as October 2005, the first coffee house of the famous American network is to appear in Russia. However, she worked only for embassy employees and on the territory of the diplomatic mission, where US laws apply. It interfered with the fact that the brand under the same name, but in Russian, was already registered in Russia and belonged to Starbucks LLC. Finally, in 2006, the American company still received the rights to the brand by a court decision. Now Starbucks is finally free to develop in Russia.
The objectives of my research are to evaluate the success of Starbucks, as well as to provide recommendations for further development and promotion to the Russian market.
1. Business idea of the project.
Story:
The history of Starbucks began in 1971, when three friends and coffee lovers - Jerry Baldwin, Zev Siegl and Gordon Bowker decided to open their own coffee shop in Seattle. Each of them invested $1,350 and took out a loan for another $5,000. This is how the first Starbucks store was born, the name of which was taken from the classic American novel Moby Dick by Herman Melville about whaling in the 19th century, and the interior of the premises was conceived in a classic nautical style. In 1982, Howard Schultz joined Starbucks as Director of Retail Operations and Marketing, which later made the company one of the largest coffee houses in the world.
At first, Schultz did not work for the company for very long. In those years, Howard managed to visit Italy. There he found a significant number of coffee houses that had a special atmosphere that attracted customers. After arriving home, Schultz tries to persuade the founders of Starbucks to open a cafe at the stores, but they oppose such an undertaking. They believed that with this approach, their store would lose its essence and distract consumers from the main thing. Then Howard leaves the company and undertakes to make his dream come true. In 1985, he opens the first coffee shop in Chicago called II Gionale. A second location opened in Seattle and a third in Vancouver. Things went very well for Schultz, and after 2 years he acquires Starbucks for $4 million.
In 1987, the company was renamed Starbucks Corporation. For the development business model, Schultz took the McDonald`s franchise scheme. In 1988, the company entered the mail-order business and released its first product catalog, thanks to which it supplied 33 stores in different states of the United States, and in 7 years the company will have 165 stores in America. In 1996, the first Starbucks outside the US opens in Japan, followed by Singapore, the Philippines, Taiwan, Thailand, New Zealand, Malaysia, China, South Korea, Kuwait, and Libya.
Now Starbucks has more than 16,706 locations, 7,856 of which are in 55 countries around the world, where they try to follow the concept developed over the years: “Roasted coffee since 1971. Best cup then. Better cup now."
Positioning.
Now the company is positioning itself as a chain of quick service coffee houses, where, in addition to coffee, customers are offered full breakfasts and lunches. In any of the coffee houses, the visitor can simply relax, work in a pleasant atmosphere (all establishments are equipped with WI-FI spots), or chat with business partners in an informal setting or listen to music.
The success of Starbucks is not only an effective business model, but also an innovative approach to consumer psychology. Unlike regular cafes with waiters or quick service eateries, no one urges people on - they do not have to leave the coffee shop immediately after drinking their coffee or tea.
Starbucks came up with the idea of a third direction: this is a place where you can relax, recharge your batteries; it's an oasis, not just a coffee shop. It's safe - it's not a bar, and there are no drunks here. They come there to socialize or to be alone. But even in the latter case, the surrounding people, conversations and calm music create the effect of presence in society. Sociologists later described the effect of such a space as a "third place" - a place where people can come to be outside of home ("first place") or work ("second place").
Basic strategies.
The key to economic growth lies not only in low production costs, but also in the additional advantages of the company - in innovation, design and architecture, clean, intangible and exciting brand fashion. It's more than the product itself.
The hospitable atmosphere has allowed Starbucks to sell a range of tempting and expensive additional services such as cakes and CDs. The principle of Starbucks marketing is to invent a new way to do what people have been doing for days and focus their business on customers. The company has also achieved market dominance by imbuing its brand with social concerns such as trade, sustainable development, literacy and clean water. The ultimate goal of the company is to build on a successful brand, in addition to coffee, a number of other key elements such as ice cream, bottled drinks, beer and even cyberspace.
product group of the product.
Starbucks products have a wide range of products. It includes coffee, handcrafted beverages, related products, fresh food, consumer goods and a portfolio. (See Appendix 1)
2. Choice of country markets.
The company's strategy is such that in new markets, in new regions, it does not seek to make a profit, directing all free funds for development. As a result of this policy, the geography of the company's presence is rapidly expanding, and its total income is growing rapidly.
In 1992 and 1993, Starbucks developed a three-year geographic expansion strategy for target areas that not only had favorable demographics, but could also be served and supported by the company's operating infrastructure. The opening of new Starbucks outlets has steadily become more and more successful. In 1995, new stores averaged $700,000 in revenue in their first year, much more than the $427,000 average in 1990. This was partly due to the growing reputation of the Starbucks brand. In most cases, what happened was that Starbucks' reputation reached new markets before the stores opened. In addition, existing stores continued to increase sales.
In 1996, after a thorough study of demand and drawing up appropriate plans, Starbucks opened its cafes in Japan. The company was sure that Starubcks could hardly grow faster abroad than there. After that, the methodical expansion of the Starbucks cafe chain began both in Asia and in Europe. Starbucks' European expansion culminated in 1997 when the company bought the UK-based Seattle Coffee Company and converted the company's outlets into Starbucks coffee shops. By the end of 2000, Starbucks had opened 900 locations in 22 markets outside of North America, and continued to expand the company's coffee shop chain. In the vicinity of London, the company opened an enterprise specializing in roasting and distributing coffee beans.
Starbucks coffee houses came to Russia later than planned by the marketing plans of Starbucks Coffee Company. The reason for this is that some enterprising people founded Starbucks LLC in 2004 and registered the Starbucks trademark not for the purpose of developing the coffee business, but in order to receive compensation from the Starbucks Coffee Company. After justice prevailed, the company began to open Starbucks coffee shops in Moscow. Russia becomes the 41st country in the Starbucks empire.
3. Choosing a way to enter country markets.
In the process of expanding its operations, Starbucks is pursuing a three-pronged growth strategy in international markets. Depending on the circumstances, the company either enters into licensing agreements with other firms, or opens its own enterprises, or organizes joint ventures with foreign partners. However, the company's management still refuses to sell the rights to open a Starbucks cafe on a franchise basis to individual operators.
For example, Starbucks does business in Australia under licensing agreements. Local or regional operators enter into contracts with Starbucks to open and operate Starbucks locations in that region. This way of doing business is very similar to franchising; however, the license agreement, unlike a typical franchise agreement, has a clearer structure and contains a number of restrictive conditions. When buying a franchise, not only the brand is acquired, but also instructions on how to work with it. And the license makes it possible to create an emotional attachment to quality goods. Licensing agreements can only be concluded with companies that are already active in a particular market. In Puerto Rico and the UK, Starbucks has its own coffee shops. On the territory of China People's Republic Starbucks is expanding its chain of coffee shops by entering into joint venture agreements with local investment groups. Starbucks has a strategic business plan to expand its operations to virtually every region of the world.
At the end of 2010, 16,706 coffee shops were opened in more than 55 countries of the world, of which approximately 7,900 belong to Starbucks Corporation, and the rest are opened on the basis of license agreements.
The license does not imply any business restrictions, so it can be easily adapted to many products. Many of the countries where Starbucks is located have their own national characteristics. The use of a licensing strategy allows the company to adapt to the local traditions and mentality of the inhabitants of various country markets.
The licensing strategy consists of selling licenses to foreign firms that grant the right to use the company's technology or to manufacture and distribute its products. The company wants to protect itself from the invasion of those wishing to open a branded coffee shop anywhere and everywhere. The company adheres to the principle of "quality is better than quantity". Starbucks is willing to wait to enter any market until it has established operations in countries where it already has establishments.
Starbucks development strategy is a global strategy. The company uses a single competition model, common technologies, knowledge and experience in all countries where it operates. Also, Starbucks offers standard products moderately adapted to local conditions as needed.
Most licensees are prominent retailers with in-depth market knowledge and access. Starbucks collects royalties and license fees, sells coffee, tea and related products for resale at licensed locations.
The company licenses the rights to manufacture and sell branded products through several partnerships, both nationally and internationally. Significant license agreements include:
North American Coffee Partnership, a joint venture with Pepsi-Cola Company, in which Starbucks is a 50% equity investor, manufactures and markets ready-to-drink beverages, including bottled Frappuccino and Starbucks DoubleShot in the United States and Canada;
Licensing agreements for the production, marketing and distribution of Starbucks Discoveries, a ready-to-drink chilled drink and Starbucks DoubleShot espresso in Japan and South Korea;
A licensing agreement with a partnership formed by Unilever and Pepsi-Cola Company to manufacture, market and distribute Tazo ready-to-drink tea in the United States;
License agreement with Unilever for the production, marketing and distribution of Starbucks ice cream in the US.
In 2005, Starbucks did not find a development partner among the largest restaurant holdings in Russia and decided to enter the market on its own. The first partner of Starbucks in the Russian market was the Marriott chain, in whose hotels Starbucks retail outlets were opened. The pilot Russian Starbucks project has already started: coffee under the brand name of the largest American chain is bottled at the Renaissance Hotel on Olympiyskiy Prospekt. Thus, Starbucks decided to carry out the initial launch of its network in the Russian market without the help of any of the major Russian restaurant operators or retailers. Starbucks entering Russia through a hotel chain is a win-win. Here Starbucks gets guaranteed customers among foreigners and at the same time gets acquainted with the specific Russian market.
To "really" enter the Russian market, Starbucks entered into a partnership with M.H. Alshaya, a trading company based in Kuwait that hosts Starbucks in the Middle East. Arabic M.H. Alshaya Co. - one of the leading companies operating in the consumer market under the franchising scheme. The choice of Starbucks is explained by the fact that Alshaya has successfully coped with the placement of other brands in Russia, such as Body Shop, Next and Mothercare, River Island, which it operates, and also by the fact that these companies have developed a good relationship.
4. Choice of consumer segments.
In Russia, the main target segment is consumers aged 16 to 45 years. Starbucks offered a very democratic choice - students, parents with children or office workers could be in one coffee shop.
Undergraduate and graduate students represent another new and large growing target market in the coffee industry. These two segments account for the largest portion of gourmet coffee drinkers. Studies have shown that coffee consumption increases with the level of education of the person consuming it.
Urban areas have more coffee drinkers because most of the educated professionals live there, as well as major universities. The proportion of educated people is increasing, which leads to an increase in the coffee market.
Starbucks does not limit itself to any particular demographic, behavioral or geographic segment. Starbucks values all of its customers and treats them equally. Most open-minded adults are mentally open to everything new, which is why they are a good target market. The company promotes diverse minorities and women in business, encouraging diversity and setting new goals. This increases the sense of self-worth among all of its customers.
5. Definition of goals and marketing strategies.
To develop a strategy, it is important to analyze the costs along the chain of stages from designing a product to bringing it to the consumer, as well as by the main and auxiliary activities of the organization. To carry out such an analysis, M. Porter proposed a scheme of the organization's value chain. Starbucks value chain:
Incoming logistics: Reliable supply under long-term contracts of high-quality coffee beans from Latin America, Asia and Africa.
Operations: Starbucks has its own roasters. Roasted beans are tested for color in an Agtron analyzer. If, according to the results, the sample is not perfect, then the whole batch is removed.
Marketing and Sales: Currently, Starbucks advertises little on television and radio. The company has built its popularity through its seductive atmosphere, word of mouth advertising through direct communication and rapid expansion.
Service: Starbucks helps its customers by advising them on the choice of coffee, coffee grinders, coffee makers, and also offers drinks for tasting.
Supply: The company bought TheCoffeeConnection in 1994 and United
Kingdom's SeattleCoffeeCompany and reopened them under the Starbucks name.
Technology/Development: Starbucks has developed its own website that allows customers to order related products and coffee directly online. Consumers can also research products for sale, view current financial information, and find answers to frequently asked questions. Starbucks website for Russia – “www.starbuckscoffee.ru”
Personnel Management: All Starbucks employees must complete at least 24 hours of training (where they are taught how to brew the perfect cup of coffee). The company also offers its employees a favorable social package.
Management: The firm is organized in a matrix between functional division and commodity production. Starbucks has managed to avoid a hierarchical organization structure and therefore they do not have a formal organizational structure.
The Starbucks strategy is a global differentiation strategy where an organization gives its products properties that are different from those of competing products in all countries in order to create a unified global product image and ensure a sustainable market position. The company uses a single competition model, common technologies, knowledge and experience in all countries where it operates. Also, Starbucks offers standard products moderately adapted to local conditions as needed.
Starbucks' international development strategy combines strong growth and the long-term potential of established markets, while expanding into several new and promising ones.
Every day, Starbucks opens an average of three new stores worldwide. At the same time, the company's strategy is such that it does not seek to make a profit in new markets, directing all free funds for development. For example, outside the US, Starbucks is investing heavily in the acquisition of premises at the intersections of key busy streets. Because of this, outside the North American market, only subsidiaries in South Korea, Taiwan and Singapore are profitable. The trouble is that sales in "old" coffee shops have recently begun to slow down, and since Starbucks is a public company that enjoys great confidence in the market, it is critical for it to remain attractive to investors. Only by improving profitability in core markets will Starbucks be able to continue its strong overseas expansion.
The company believes that consumers consider high product quality, service, convenience and price. Starbucks competes not only in drinks and food with fast food restaurants, but also with companies that sell whole roasted coffee beans through stores. In addition, the company faces significant mail-order competition from firms with stronger marketing and financial resources. Starbucks counts a large number of competitors among fast food restaurants and similar coffee chains.
Areas where Starbucks is facing strong competition:
Results of the company's activity for 2005-2009. in billions of dollars
The result of the company's activities at the end of the fiscal year Net Income: |
September 27, 2009 | September 28, 2008 | September 30, 2007 | October 1, 2006 | October 2, 2005 |
| Points managed by the company | $ 8,180.1 | $ 8,771.9 | $ 7,998.3 | $ 6,583.1 | $ 5,391.9 |
| Specialization | |||||
| Licensing | $ 1,223 | $ 1,171.6 | $ 1,026.3 | $ 860.6 | $ 673.0 |
food service, etc. |
$ 372.2 | $ 439.5 | $ 386.9 | $ 343.2 | $ 304.4 |
| Total by specialization: | $ 1,594.5 | $ 1,611.1 | $ 1,431.2 | $ 1,203.8 | $ 977.4 |
| Total income | $ 9,774.6 | $ 10,383.0 | $ 9,411.5 | $ 7,786.9 | $ 6,369.3 |
Due to the financial crisis, the company was forced to close several of its own, not licensed, outlets located in the US and China. As a result, the company's revenue fell slightly.
The main competitors of Starbucks in the USA.
By number of points:
McDonlad's (McCafé) is also significantly ahead of Stabucks in terms of sales. Only among coffee shops Starbucks has a monopoly.
Information about the desire of the American Starbucks to bring the network to the Russian market appeared a long time ago. However, the opening of coffee houses in Russia was prevented by a lawsuit with the local Starbucks LLC, whose lawyers demanded $600,000 from the American company for the right to use the brand in our country. November 2005 Russian court sided with Starbucks Corporation., after which the Americans intensified negotiations with potential partners.
The goal of Starbuks in Russia is to launch at least 500 coffee shops in the coming years. In Russia, Starbucks has opened 40 outlets. The opening of the remaining coffee houses will depend on the results of the work of the first 40. The company has developed a development strategy - to expand gradually, opening one point at a time. The main competitors of Starbucks are Coffee House 200 and Shokoladnitsa 180, as well as CostaCoffee, MoccoLocco, CoffeeRepublic and CoffeeBean 11 In Russia, McCafe and Starbucks are almost not considered competitors - firstly, here they are perceived as operating in different niches, and secondly, the presence of Starbucks is still very small.
The Russian coffee market has been growing by about 40% annually over the past five years. However, Russia is no longer virgin land for coffee drinkers. Big players like Starbucks and Costa Coffee are raising their standards. Local coffee houses "Coffee House" and "Shokoladnitsa" opened their establishments not only throughout Russia, but throughout the former USSR. This number certainly exceeds the number of Starbucks and Costa Coffee outlets in the region today.
Russian chains have a competitive advantage knowing the preferences of Russian consumers in favor of pancakes with jam or honey for breakfast, ice cream with coffee in the summer, and traditional tea with cakes.
Local centers also have cosmopolitan and modernist interior and exterior design, Western style management and, last but not least, cleanliness. McDonald's with its McCafe is a cheap but rather serious competitor for all caffeine. The food chain is the largest fast food operator in Russia. However, in Russia McCafe and Starbucks are almost not considered competitors - firstly, here they are perceived as operating in different niches, and secondly, the presence of Starbucks is still very small.
The management company Monex Trading, which develops a network of coffee houses in Russia, was negotiating with a Swedish company to conclude an agreement according to which American coffee houses entered all Mega shopping centers in Moscow. Thanks to this agreement, Starbucks will be able to automatically expand its network in Russia. The first outlet opened in the Mega-Khimki shopping mall.
According to experts, Starbucks in Russia is relying on an unusual development strategy for itself - non-aggressive organic growth. The volume of investments in the opening of one Starbucks point will be up to 1 thousand dollars per 1 sq. m. m (200 thousand dollars for one coffee shop). Starbucks opened in Moscow in a format more familiar to the Russian consumer - coffee shops. The company is rather cautious in selecting partners in Russia. It has very high requirements for the quality of service and premises. In June 2010, there were about 31 coffee shops in the Starbucks network in Moscow. The company plans to open Starbucks coffee shops in St. Petersburg. It is planned that the first Starbucks coffee shop in St. Petersburg will be opened in the Leto shopping mall, which is being built on Pulkovskoye Highway.
To please the Russians, Starbucks sells more croissants, sandwiches and desserts here than in the US. A significant part of them was developed specifically for Russia, such as the Medovik and Apple pies, croissants with salmon, a sandwich with cheese and mushrooms.
The chain uses more cinnamon and other flavors that are popular here. Even the name of the coffee shops on the sign has become Russian - “Starbucks Coffee”. If in the US Starbucks cups are most often seen in the hands of public transport passengers, in Russia the company focuses primarily on those who like to sit - in the first cafe with an area of 150 square meters. m tables can accommodate 65 visitors. But in general, the menu will repeat the range of other chain coffee shops in all parts of the world, and the cost of latte and other drinks will be about the same as in the United States.
Although traditionally popular in Russia is tea or, in the recent past, instant coffee, Starbucks expects its drinks to appeal to Russians with their predilection for Western brands. They argue that customers will be attracted by the very possibility of spending time in a Starbucks coffee shop, whether they like the taste of coffee or not.
The next step for Starbucks is the opening of coffee shops in St. Petersburg. The consulting company Cushman & Wakefield conducted a study of the market of cafes and coffee houses in St. Petersburg. According to the company, network operators account for about 60-70% of all coffee shops in the city. Almost a third of cafes and coffee houses are located in shopping centers, the rest work in the street retail format. However, among the network operators, most of them work on the streets of the city. The largest share among chain cafes and coffee houses (about 45%) falls on Nevsky Prospekt, 12% - on Sadovye Streets, 11% - on the Moscow Canal, 10% - on the Griboedov Canal, 4-8% each on Vladimirsky, Ligovsky, Liteiny and Grand Avenue. The market leader in St. Petersburg remains the federal chain Coffee House, which has more than 50 establishments in the city on the Neva. 23 coffee shops at Shokoladnitsa, 16 at Chaynikoff, 13 at Coffeeshop Company, 11 at Ideal Cup. Starbucks plans to enter the St. Petersburg market no earlier than 2012.
In addition, Starbucks is preparing to launch Starbucks coffee machines branded as Best Coffee. True, they will sell cheaper coffee than Starbucks. So the company intends to compete with McDonald's and Dunkin Donuts - eateries and coffee shops in the low price segment.
6. Food mix.
To maximize brand awareness and establish itself as the most recognized and respected brand worldwide and in its target market, Starbucks implemented a well-integrated marketing program using a marketing mix (product, price, location and promotion) that satisfies needs and requirements. their target market.
The elements of the Starbucks marketing mix are as follows:
Product: Starbucks' product range has expanded from 30 whole-bean coffees to classic coffee drinks and espresso coffees, coffee makers and other Starbuck accessories. Also, the offer of product lines has expanded from simple pastries and sandwiches to oatmeal and fruit yoghurt cocktails. Among other things, the company introduced the use of wrapping paper at checkout to keep up with the competition and meet the needs of customers.
Also, the company is constantly introducing new products such as "InstantviaReady", "FullLeafTazoTeaLattes" and "TazoTeaInfusions". "InstantviaReady" is an instant coffee that the company claims is indistinguishable from its normally brewed coffee. "FullLeafTazoTeaLattes" and "TazoTeaInfusions" are the company's new tea offerings through which it hopes to attract tea drinkers. The company also offers Starbucks coffee and a cappuccino maker for those customers looking to replace their existing home coffee makers.
The Company owns and uses numerous registered trademarks and service marks both in the United States and in many other countries around the world. Some of the company's trademarks, including Starbucks, the Starbucks logo, Frappuccino, Seattle'sBestCoffee, and Tazo are significant to the company. The duration of trademark registration varies from country to country. However, trademarks are generally valid and renewable as long as they are in use or their registration is properly maintained.
The company owns numerous copyrights for items such as product packaging, promotional materials, and educational materials. The company also holds patents for certain products and designs. In addition, the company has registered and maintains numerous Internet domain names, including "Starbucks.com", "Starbucks.net", and "Seattlesbest.com".
Starbucks is expanding its range of services. Starbucks has announced the launch of a free internet service. The project, called StarbucksDigitalNetwork, will provide 10,000 coffee shop customers with free movies and music that can be downloaded over a Wi-Fi connection.
Price: prices for Starbucks products are slightly different from the "native", American ones. They are about 40% -50% higher, although for Russian establishments these are quite normal and acceptable figures (for example, 175 rubles for 473 ml of coffee). Firstly due to high rents and secondly higher due to the perceived upscale image associated with the Starbucks brand. The company focuses on inexpensive coffee products so that consumers do not perceive it as an inaccessible and intimidating coffee chain.
Place: Starbucks now has over 16,706 locations worldwide. Starbucks can be found in any area with a high concentration of stores and malls. Their location is extremely convenient for people in a hurry and those who like to read or listen to music. In Russia at the moment there are 31 coffee houses located in large shopping centers, the airport, and only a few points in the city center.
Promotion: Starbucks has numerous promotions to achieve its target markets:
· Starbucks card - the ability to pay for a purchase at Starbucks coffee shops, having previously replenished it with an amount from 500 to 10,000 rubles. The card is ready for use in any Starbucks coffee shop both in Russia and abroad. When a customer buys a gift card, it not only shows loyalty to the brand, but also provides the company with free advertising and attracts new customers. Starbucks also provides corporate sales cards used for external awards to show an employee appreciation for a job well done, or as a gift to a customer or salesperson.
· Coffee services - delivered to offices without restrictions on the size of coffee.
· Catering to a diverse customer base – accompanied by an offer of international teas and coffees for those customers who want to experience the taste of a homemade drink or for locals who enjoy tea.
· Using charity as a vehicle to promote - Starbucks is partnering with several non-profit organizations to improve brand image and awareness in local communities.
7. Contract price mix.
Starbucks has become a $15 billion global corporation, offering consumers a rich selection of quality coffee at an affordable price. The company adheres to a single pricing policy, so coffee in Starbucks coffee shops will rise in price in the same way - from Chile to Germany. In early September 2004, Starbucks announced that it would raise coffee prices for the first time since 2000. Formally, the forthcoming rise in prices was caused by a rise in the price of products (due to expensive oil): since the beginning of 2003, milk prices in Europe and the US have increased by 63%, coffee and sugar have slightly risen in price. In fact, it is caused by the need to maintain the phenomenally high pace of the company's global expansion.
Because Starbucks is a publicly traded company with a lot of market credibility, it's critical for Starbucks to remain attractive to investors. The increase in prices is necessary to improve the financial performance of the company. Only by improving profitability in core markets will Starbucks be able to continue its strong overseas expansion.
However, if prices are raised too much, it may not have the effect the company is aiming for. After all, the coffee shop market has changed significantly in recent years (largely under the influence of Starbucks itself, which created a segment of affordable coffee shops with a large selection of quality coffee). Chasing high growth rates in established markets can alienate traditional customers.
Starbucks' pricing policy, as is already noticeable now, is not democratic: coffee prices are higher than most local chains. Starbucks said the rising price of Arabica beans is forcing it to raise the price of some beverages. The rising price of coffee has changed the coffee industry, so Starbucks is forced to change pricing policy. Prices for some types of espresso coffee will remain the same, but more complex drinks such as Coffee Frappuccino will be increased.
The coffee chain has promised to change its pricing policy in some markets. At the moment, due to the onset of competitors, the Starbucks coffee chain has decided to adjust its prices. The price of some "exclusive" drinks on the menu will increase, while the basic offers will become cheaper. The coffee chain has promised to change its pricing policy in some markets. In particular, a large portion of iced coffee will cost less than $ 2, having fallen in price by 45 cents or more - depending on the country. Starbucks management took this step to attract and retain consumers in a recession.
8. Sales and distribution mix.
Starbucks is committed to selling only the finest coffee beans and coffee drinks. To ensure that strict coffee standards are met, Starbucks manages the purchase of coffee, its roasting and packaging, and the global distribution of coffee used in its operations. The company purchases whole coffee beans from Latin America, Africa and Asia at fair market prices and roasts them in-house to its exacting standards before supplying the roasted coffee beans to stores for sale and cafes for consumption.
The supply and price of coffee can be subject to significant volatility. Most coffee trading takes place on the commodity market. Prices depend on supply and demand at the time of purchase. Supply and price may be affected by various factors in the producing country, including weather, political and economic conditions.
Starbucks relies on its relationships with coffee growers, outside trading companies and exporters to supply unroasted coffee beans. The Company believes that, based on the relationships it has established with its suppliers, the risk of non-delivery on placed orders is unlikely.
To avoid becoming a "monster" of capitalism, the company introduced a special fair trade scheme (fair trade). Under this scheme, the company began to buy coffee from farmers directly, avoiding intermediaries. This increased the income of farmers by 2-2.5 times, but it became more expensive for the company itself. Starbucks also established a special charitable foundation, which began to finance projects in the field of education, environment and health care in countries where coffee is purchased.
In addition to coffee, the company also purchases a significant amount of dairy products, especially drinking milk, to meet the needs of its company-operated retail outlets. The largest volume of dairy purchases comes from the USA, Canada and the UK.
The company believes that, based on the relationships it has established with its suppliers, the risk of non-delivery of drinking milk to retailers is unlikely. Coffee equipment such as coffee presses, espresso machines and coffee grinders are usually purchased directly from their manufacturers.
Beverage-related paraphernalia, including products bearing the company's logo and trademark, are manufactured and distributed under contracts with numerous different suppliers. The company purchases a wide range of paper and plastic products such as cups and cutlery from several companies to support the needs of its retail stores and its manufacturing and distribution operations. The Company believes that, based on the relationships established with these suppliers and manufacturers, the risk of non-delivery of goods is unlikely.
Raw material supply scheme:
In Russia, coffee beans are delivered directly from the company itself, and food is purchased from local suppliers under long-term supply contracts. All baked goods, sandwiches and salads are hand-crafted from special Starbucks recipes and delivered to coffee shops daily.
9. Communication mix.
Surprisingly, the company almost never spent money on advertising and marketing. In the mid-1990s, when Starbucks began expanding overseas, its annual advertising budget was only $15 million. Coca-Cola spent more on advertising per day.
The company owes its success to an exceptionally successful business model that very accurately takes into account the psychology modern man. From the very beginning, Starbucks has strived to be more than just a coffee shop, offering the customer a lifestyle.
Currently, Starbucks advertises little on television and radio. The company has built its popularity through a seductive atmosphere, word of mouth advertising, and rapid expansion. Starbucks has developed some unique marketing strategies for new markets, such as the introduction of "passports" (where customers receive a shopping bonus stamp when they buy half a pound of coffee; after they collect 10 bonuses, they receive a free half pound as a gift), cards that customers can pay in any Starbucks coffee shop around the world.
Starbucks has over 705,000 Twitter followers and almost 5.5 million Facebook fans. Starbucks' social media strategy makes it successful:
1) Starbucks on Twitter - Starbucks collaborates with customers on Twitter by answering questions, retweeting (answering) what users are saying about the brand, and this creates an open communication channel to speak to the public.
2) Starbucks on Facebook - Starbucks uploads content to the Facebook page for fans: videos, blog posts, photos. The company also invites people to events. This is a place where fans can open discussions and add their comment, which is what many of them enjoy. Starbucks' strategy, as well as its brand activity, is notable for being the first brand on Facebook to reach 10 million fans on its page.
3) Starbucks on YouTube - Over 4,800 people subscribe to the Starbucks YouTube channel. The company uploads videos and informational videos explaining the origins of various coffee blends, as well as videos about its philanthropic work. They also upload videos about the history of the company so that people can be more connected to the brand. Starbucks also allows people to embed their videos everywhere. Many companies do not allow this for fear that their video will be placed on pages where their brand will look terrible or be associated. However, the experience of Starbucks and other brands (eg Dell) shows that this strategy only increases the positive impact of the brand, and not vice versa.
Unfortunately, in Russia, such a social network as Facebook has not received wide distribution. Considering that Starbucks does not conduct marketing campaigns through other media sources, it would be wise to create a Starbucks fan page on such a popular social network in Russia as Vkontakte. Also, the company can distribute flyers advertising coffee through stores located in the same mall where the coffee shops are located.
10. Organization and budget for international marketing
Starbucks was one of the first American companies to feel the recession. This happened back in July 2008, when the most famous coffee chain in the world suspended its development. Starbucks suffered losses for the first time since its public offering in 1992. The company's net loss in the third quarter of 2008 was $6.7 million. A year earlier, the coffee shop chain earned $158.3 million in the third quarter.
Starbucks cut its net income by 77% in the second fiscal quarter ended March 29, 2009, cutting back on plans to open new restaurants in the chain. In 2009, the company opened only 20 coffee shops. In its second fiscal quarter, Starbucks posted a net income of $25 million, or 3 cents per share. Earnings excluding restructuring costs came in at 16 cents per share, beating analysts' consensus estimate of 15 cents per share. At the same time, revenue fell by 7.6%, reaching $2.33 billion. Savings for the reporting period amounted to $120 million.
Consumers remain very cost sensitive, and Starbucks' profits are down 77% year-over-year. The decline in Starbucks revenue is due to two reasons. First, there are objectively fewer customers. And secondly, existing customers of the company began to leave checks at Starbucks for smaller amounts than before. People count money. Over the past year, Starbucks has taken a number of measures that were supposed to reduce the rate of decline in the company's revenue. In particular, Howard Schultz actively closed numerous cafes of the company, which had previously opened in large numbers. During the crisis, Starbucks began to feel more competition from other companies, such as McDonald’s, which offer their coffee much cheaper (although it is believed that McDonald’s has neither the atmosphere of Starbucks nor the same quality coffee).
Starbucks again felt the growth in traffic in the third quarter of fiscal 2010, against which it plans to strengthen the position of its new products in the markets of China and Russia. Starbucks, leading the fight to boost growth, launched a new product in September 2009, Via Instant Coffee, which could reach $100 million in annual sales.
Starbucks is currently looking towards emerging markets such as Russia, which is one of the main markets for instant coffee sales, and China.
Starbucks recently completed a two-year business restructuring that included cutting costs and closing more than 900 stores worldwide. The US business, which generates more than half of total profits, has returned to growth, and now, in order to boost sales, Howard Schultz is focusing on launching new products. The key one is Via instant coffee. Starbucks plans to turn Via into a billion-dollar brand with a focus on the Chinese market and, a little later, Russia.
Currently, Starbucks has only 40 cafes in Russia (21 outlets in shopping and entertainment centers, 9 outlets in business centers, 1 outlet at the airport, 9 single outlets), however, these outlets have generated impressive sales, the income from which will be directed to the development new brand in the country.
In 2009, the top three instant coffee consumers were Japan, Russia and the UK. In these countries, the revenue from the sale of instant coffee was at the level of $2.3 billion, $2.1 billion and $1.2 billion, respectively, according to a study by Euromonitor.
Starbucks generally expects Via to make a "fairly positive contribution" to overall FY2010 earnings, even if it comes with significant marketing and advertising expenses.
11. Strategic plan for international marketing
To determine the further strategy of Starbucks in Russia, we will conduct a SWOT analysis of the company in the Russian market. (See Appendix 2)
The state of the market is such that local cafes have appeared in almost every major city, real estate has risen in price, and the labor market has tightened, making it difficult for the company to find the right staff. In addition, Starbucks competes not only with local rivals, but also with other Western giants such as McDonald´s, which is opening all new McCafe departments in its outlets.
However, Starbucks has a significant competitive advantage over other coffee shops - a strong and prestigious brand. Thanks to it, the company, when placed in shopping centers, can count on significant discounts on rent. The American player works in a fundamentally different niche: there is no alcohol in the chain's establishments, they are not allowed to smoke, Starbucks coffee is heavily roasted, while Russian coffee shops offer visitors a milder version.
An American company can find its niche in Russia. In Russia, consumer demand is growing very rapidly, this is the main engine of economic growth, this industry attracts more investment than others. The Moscow market of coffee houses, restaurants, cafes is not yet highly developed. There are network coffee shops, but they are still not enough. In Moscow per capita sales of such products and consumption of such services are much lower than in Europe. Existing similar establishments in Moscow are still distinguished by a low level of quality and coverage of the target audience, they are all in approximately the same price category. There are not enough expensive, cool, or vice versa folk institutions that would be everywhere. The significant untapped capacity of this market allows a large network to simply carve out a niche. There will be competition, maybe not price, but the struggle for different target audiences.
Starbucks can afford a fairly long organic path. Independent development in Russia is a more image-building project than a commercial one. However, the company's financial resources will allow it to survive a long period of adaptation in Russia and wait until the consumer gets used to the Starbucks concept and brand.
Bibliography:
1. The official website of Starbucks - http://www.starbucks.com
2. BIZENTR business portal - http://bizcentr.com
3. Website dedicated to marketing - http://www.fiolet-korova.ru
4. Forbes, Steve. "Who'da Thunk It? Coffee Is Hot" / Forbes Magazine Vol. 176 Issue 12 / 2005
5 Pigott, Tony. "The Marketplace of Meaning" / Canada Business Magazine Vol. 79 Issue 19 / 2007
6 Scarpa, James. "Grounds Keeper" / Restaurant Business Magazine Vol. 96 Issue 4 /1997
7. The McGraw-Hill Companies - http://catalogs.mhhe.com/mhhe/home.do
8. The site of the company "Our city" - http://www.ourcity.ru/
9. Vikhansky O.S. /Strategic management: Textbook. - 2nd ed., revised. and additional - M. / Economist, 2004.
10. Official website of the project "Veding in Russia" - http://www.infovending.ru/
11. Business portal "Russian business" - http://www.rb.ru
12. A. Koksharov / Starbucks. A very profitable "third place"" / economic magazine "Expert" - http://www.expert.ru
13. BBC Russian news service - http://www.bbc.co.uk/russian/
14. Information expert and analytical resource "News of humanitarian technologies" - http://gtmarket.ru/
15. The official website of the business research company "Hoover's" - http://www.hoovers.com/
16. Website surveying the coffee market - http://www.coffeechainworld.com/
17. "Fair", reviews of the food market - http://www.yarmarka.net
18. "International community of managers" - http://www.e-xecutive.ru/
19. Internet edition "Retail.ru" - http://www.retail.ru/
20. Consulting company for logistics audit "LFA" - http://www.lfa.ru/
22. Electronic publication about large shopping centers - http://malls.ru/
23. Internet portal dedicated to coffee and coffee topics - http://www.coffeetime.ru/
24. P. Kulikov / "Coffee Chaos" / magazine "The Secret of the Firm" No. 31 (263) / 11.08.2008
25. Information and analytical portal of the BCS Financial Group - http://www.bcs-express.ru/
26. Internet-spent dedicated to coffee - http://www.prokofe.ru/
28. Publishing house "Mall", specializing in B2B projects in the field of commercial real estate - http://www.mallhouse.ru
29. Internet portal "Business Petersburg" - http://www.dp.ru/
"Companyinformation" -http://www.starbucks.com/assets/company-profile-feb10.pdf
"Starbucks Success Story" - http://bizcentr.com/succes-starbucks.html
"Starbucks Success Story" - http://bizcentr.com/succes-starbucks.html
"Companyinformation" -http://www.starbucks.com/assets/company-profile-feb10.pdf
"Starbucks Success Story" - http://bizcentr.com/succes-starbucks.html "Starbucks in Russia - Competitors at the Ready" - http://www.rb.ru/inform/22997.html Starbucks" - http://www.retail.ru/news/39948/?year=2009
"Starbucks Success Story" - http://bizcentr.com/succes-starbucks.html
"Starbucks profit fell by 77%"
"Starbucks bets on Russia and China" - http://www.dp.ru/a/2010/07/16/Starbucks_stavit_na_Rossi
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In Russia and abroad
Development strategies of large and medium corporations
Modern corporations- these are large diversified structures, the stability and competitiveness of which is ensured by the optimal combination of types of entrepreneurial activity.
In a stable economy development of corporate development strategy is a process that includes the development of fundamental directions of activity or their combinations, determined by the foresight by corporations of the strategic parameters of the external and internal environment, in order to generate sustainable income.
Currently, the formation and development of corporations around the world is taking place as part of the transformation of the world economy and international relations. The results of this process have been the globalization and internationalization of business; growth in the scale of production; a crisis of overproduction in some countries and an acute shortage of goods and services in other countries; increased international competition; development of scientific and technical progress; economic diversification, etc. Therefore, companies in modern conditions have the opportunity to make a strategic choice:
What market to operate in (local, regional, national, international);
· to what extent the market should be mastered, i.е. it must be fully mastered, related or completely new;
· what volume of the market is supposed to be mastered (one segment, several segments, the entire market);
What should be the relationship with competitors and partners;
· how innovative activity should be developed, etc.
Thus, a number of strategies for the development of modern corporations have been formed: the strategy of internationalization, the strategy of globalization, the strategy of diversification, the strategy of cooperation, etc. Let's consider some of them.
Internationalization is a process of development of sustainable economic relations between countries based on the international division of labor, and the expansion of reproduction beyond the national economy. The internationalization of economic processes is based on the deepening of international specialization, the internationalization of production and capital, and the formation of transnational corporations.
At the microeconomic level, the process of internationalization is seen as the entry of firms into foreign markets and the strengthening of their positions in these markets.
The main methods of internationalization (ways to enter the international market) include: export and import of goods; direct foreign investments; joint venture; turnkey contract; management contract; international leasing; franchising, etc.
The company's internationalization strategy can be viewed from the point of view of the evolution of the global marketing strategy, which includes four main stages:
1. Preparatory stage. At this stage, the company focuses its activities on serving the domestic market and does not resort to export. But the company's management is already beginning to think about entering international markets, organizing a search for information about them and assessing the potential for export activities. At the preparatory stage, it is possible to carry out activities for the import of products, the creation of joint ventures with foreign partners in the domestic market.
2. Initial entry into the international market. This stage can be divided into two stages: irregular and regular export.
Companies that are at the stage of irregular export still retain their predominant orientation to the domestic market, and the volume of their export sales does not exceed 10% of the total sales volume. At the same time, the largest share of export operations is carried out through indirect exports (through an intermediary located in the exporting company's home country). The most typical example of firms that are at the stage of irregular exports are national manufacturers oriented to the domestic market and performing one-time export deliveries (mainly for a specific order).
The volume of export operations of companies that are at the stage of regular export is 10-40% of the total sales. Typical representatives of such companies include:
· small firms at a relatively early stage of development, targeting specific niches in global markets, often with innovative products (for example, in the field of high technology);
Large firms in fast-growing markets (such as India, China, and other Southeast Asian countries) that have advantages in protected local markets and enter foreign markets with a price-break strategy based on low labor costs or low production costs in his country.
3. Expansion in the local market. Having established footholds in a number of foreign markets, the company is turning its attention to further expansion of its presence there. At this stage, the company focuses on developing a marketing program for each local market, following a country-centric strategy. Such a strategy may include the creation of new lines of business; expansion of production lines; adaptation of various elements of the marketing mix to the realities and needs of each local market. Companies at this stage of the internationalization process (Heinz) operate worldwide through extensive networks of subsidiaries, with control over operations in different countries often decentralized.
4. Global rationalization. At this stage, the company is focusing on consolidating activities in the global market, improving coordination and integration between markets by developing global strategies (standardization strategies). At this stage, several types of different companies can be identified:
· companies targeting global segments, in which particular importance is attached to creating a sustainable global image and establishing effective controls to maintain it around the world (Ikea);
· companies with globally integrated strategies (Ford, General Motors), characterized by a high degree of integration of production departments between countries (especially for such a function as research and development, which is centralized in many countries).
Faculty of World Economy and World Politics
Department of International Business
Final qualifying work
on the topic: "Strategies for the internationalization of the Russian state corporation Rosatom to the international market"
Group student #561
O.A. Sinister
scientific adviser
YES. Medvedev
Moscow 2013
Internationalization and its strategies………………………………..……5
Trading Strategies……………………………………………….…7
Cooperation Strategies…………………………………………...……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………….
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 SC Rosatom………………………………..37
International scientific cooperation of State Corporation "Rosatom"……….42
Activities in the Bulgarian energy market…………………..47
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
State Corporation Rosatom is unique global company on nuclear energy. It includes 240 companies of the civil nuclear industry, scientific organizations, enterprises of the weapons complex, 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 terms of the number of nuclear power plants being built and provides services in the field of nuclear energy for 40% of the world nuclear market. In the conditions of fierce competition in the world market in the field of nuclear energy, the State Corporation Rosatom has to put in enough effort not only to cope with competition, but also to maintain its leadership position. The company's activities are global, and its activities 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 expansion into the international market, ROSATOM 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 to make expansion into new foreign markets the 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 conditions of the current state of the world economy, the topic is relevant, since in the conditions 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, trends in international cooperation.
The novelty of this research work is that it considers various ways to enter international markets and various areas of activity in the international arena.
The main purpose of this thesis is to study and identify the strategies through which the State Corporation "Rosatom" enters the international market.
The main objective of this research work is to cover most of the countries where the State Corporation Rosatom is present and to analyze the strategy, thanks to 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 strategy of internationalization of the State Corporation "Rosatom" in the international market.
Various sources were used in writing the work. In particular, "International Marketing and Business" N.K. Moiseeva, which discusses the features of choosing international markets, ways to enter international markets, motives and stages of internationalization of companies. The official websites of nuclear companies, namely the Russian State Corporation Rosatom, were also used. Various statistical databases were used. And also when writing this work, articles on nuclear energy from different countries of the world were considered.
Internationalization and its strategies
Since the 1950s, the world economy has entered the process of globalization. In pursuit of higher profits, companies seek 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, the 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 the volume of production and the quantity of products produced, but also by the presence of a market infrastructure, the use of high technologies, high technology materials, etc. All this will determine the success of the company 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 to establish international economic relations, which allows them to take and maintain positions in the international market. One of the most important aspects 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 is concentrated where the conditions for successful business are better, which allows you to get more profit. As a result of internationalization, capital investment becomes not only a national matter, but also an international one. This can be reflected in the nature, direction and volume of investments. So, 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, it is necessary for the investor to have the opportunity to attract high technologies, the presence of economic ties and the availability of information, which will contribute to increasing competitiveness and successful entry into the international market.
One can observe the shift of the world economy towards developing countries due to the increase in the number of consumers in such countries. There are two main factors of the internationalization process 1: the development of communication technologies, which ensures a quick and high-quality exchange of information, and the market work force. The young population of developing countries ensures that the labor market is filled with skilled 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 in order to confirm their leadership positions in a particular industry.
There are a number of reasons why companies seek to internationalize. In a situation where the domestic market is already saturated, it is necessary to attract new customers and consumers in the market of another country, which allows the company to continue to make a profit and establish long-term prospects.
By producing their products for export, companies rationally use the economies of scale, because. sometimes domestic markets may be limited by the amount of products that can be sold in the domestic market.
The concept of core competence plays an important role. Having a key competence, the company is more competitive not only in the domestic but also in the foreign market. The term "core competence" was introduced by G. Hamel and K. Prahalad 2 . This term refers to a certain set of skills, skills, technologies and experience that only this company has. This combination provides a competitive advantage for the organization. Key competencies arise due to 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 the country risk. By diversifying the production and marketing of goods, companies can avoid losses that arise, for example, due to an economic downturn or political instability in one country, and make a profit in another.
There are a large number of ways, models and principles for entering new foreign markets. We will call all these models and methods 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 subdivided into certain types:
Trading Strategies
Cooperation strategies
Investment Strategies
1.1. Trading Strategies
Trading strategies include trade in goods and trade in services. Accordingly, in trade in goods there is import and export, and in trade in services: licensing; franchising; subcontracting; engineering; leasing; insurance and banking services; transport services; international tourism.
Let's consider these concepts separately.
Export is understood as the export of goods and services abroad, with the aim of selling them on the foreign market and making a profit. This way of entering the international market is considered one of the least risky. For the export of products, no significant adjustment is required in 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 area of the legal framework, export mechanisms and the solvency of the host country.
In practice, there are two types of export: 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 you do not need to look for consumers and customers, but they themselves go to the seller. The company can resort to the following tools for exporting:
export department (deals with all matters related to the supply and promotion of goods on the foreign market);
availability of own personnel (sales representatives) abroad;
a team of foreign specialists who help in the development of a foreign market, supporting and stimulating the sale of products.
Another type of trading strategy is licensing. “Licensing is applied 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 payment in accordance with the concluded license agreement” 4 . In this way, the company gets access to the foreign market with the least risk, and the licensee gets the opportunity to use ready-made technologies, the opportunity to use the 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 of its own production. In addition, after the end of the license 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 follow certain rules on how to conduct business. The rule and procedure for using the franchise is reflected in the agreement between the franchisor and the franchisee. Usually, the contract determines the amount of deductions for the use of 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 deductions for the use of a franchise, the franchisee must purchase a certain amount of goods, works and / or services from the franchisor. Conditions for the use of a trademark (brand) may be singled out as a separate clause of the agreement. These requirements can vary in complexity: the franchisee may use the brand in a certain area, or the franchisee is required to dispose of the equipment in the store in strict accordance with the requirements of the franchisor, from the size and color of the shelves to the mandatory uniform of the staff 5 . Like other methods, franchising has its advantages. Entering a new market through franchising, the company has more control over the marketing of its products, retains its own style, image and brand. In case of dissatisfaction with the work of the franchisee, 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 joint activities. With this strategy, there is a division and distribution of resources and risks. Cooperation strategies are divided into:
Strategic alliances without equity participation
Co-production and/or marketing
Joint research activities and technology exchange
Informal strategic alliances
Equity strategic alliances
Joint ventures
Mutual exchange of shares
Associated 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: joint production and marketing; joint research activities and technology exchange; and informal strategic alliances. The second type of strategic alliances is divided into: joint ventures; mutual exchange shares; affiliated companies; satellite enterprises; minority equity partnerships. From this we can conclude that alliances function in three areas of activity: joint work to enter new markets; work on R&D projects; joint production.
There are a number of features inherent in strategic alliances:
This form of cooperation allows companies to work effectively together, but does not lead to a merger of companies;
Cooperation is aimed at the medium and long term;
Activity planning takes place jointly with all members of the alliance, which makes it possible to work profitably for each of the parties;
An alliance cannot be a legal entity on its own;
All members of the alliance remain independent legal entities;
Alliances are created between firms located in related areas, and which can complement each other's activities with experience, skills, technologies;
The same company can be in several alliances;
Despite the fact that alliances are aimed at the long term, they are all created for a certain period of time and fall apart when the need to work together disappears;
Alliances make companies more competitive by working together against common competitors.
There are several reasons for creating an alliance:
enterprises become more competitive in their industry;
it becomes possible to use the missing production capacities at the expense of the alliance partner;
exchange of experience, know-how, resources, technologies;
growth of enterprise stability and reduction of risks;
the ability to use a way to enter a certain market that already exists thanks to one of the members of the alliance;
joint scientific work 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 computing platform Wintel with a new computer project and operating system next generation. 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.
1.3. Investment Strategies
Investment strategies include strategies of ownership and control, ownership of property abroad, both partial and complete. This strategy can be divided into the following types:
Establishment or acquisition of a company abroad
Branches and representative offices
Construction of a new enterprise
Mergers
takeovers
The foregoing undoubtedly speaks of the effectiveness of this form of cooperation.
Mergers and acquisitions are also a strategy for entering a new international market. Mergers and acquisitions is a process in the economy that is aimed at the consolidation of economic units, which leads to the emergence of new larger participants in the market, instead of a few smaller ones. The merger process involves the union of several theoretically equal economic units, resulting in a new business entity. A merger may result in the liquidation of autonomous legal entities and the creation of a new legal entity and taxpayer that takes over 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 legal form, and the other 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 power industry abroad has two main directions. The first is focused on developed energy markets, where the decision on cooperation is made after a detailed study of the projects provided by the Russian side, namely their security and competitiveness. All types of risks are assessed: political, economic, technological. Special attention is given to the risks associated with the supply of plants, equipment, fuel and operation.
The second direction is focused on emerging markets, where the main focus 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 possibility of obtaining funding for the construction and support of nuclear facilities 8 .
So, to begin with, I would like to consider projects that are generally aimed at international cooperation and international activities in the State Corporation "Rosatom". At the end of last year, the Director General of Rosatom gave an interview to Channel 9 Rossiya-24, where he summed up the results of 2012 and made accents in the field of international cooperation.
Now India is actively developing nuclear technologies and at the moment the Kudankulam nuclear power plant is being built there according to 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 means a document called "Roadmap for the construction of nuclear power plants in India using Russian technologies." In the first place in this road map is the Kudankulam nuclear power plant, located in the southernmost part of India. There is a huge shortage of electricity in this area, so the generation of electricity in the amount of 2000 megawatts is urgently needed in this region. The construction of the Kudankulam NPP will provide India not only with sources of electricity, but will also create additional jobs. The creation of a nuclear power plant 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 have withstood a natural shock similar to what happened at Fukushima in 2011. In 2012, an agreement was received on issuing a state loan for the construction of two more power units in the same Kudankulam area 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 implies the construction of about 16 power units, which indicates the global nature of the cooperation project. In addition, the construction of stations assumes that each nuclear power unit is supplied with fuel for it. Also, there are agreements on joint scientific activities with Indian colleagues. At the moment, joint scientific developments are underway on the use of thorium as a 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. Now the State Corporation has 19 signed contracts for the construction of new nuclear power units. In countries such as:
Turkey;
Vietnam;
Belarus;
Bangladesh.
In China, this is the Tianwan NPP, where the first two power units are already successfully operating. According to Chinese experts, these facilities are now the safest of all operating in China. Thanks to this, contracts were signed between Rosatom and China for the construction of the third and fourth nuclear power units. This construction is expected to be completed in 2017. In December 2012, Chinese President Hu Jintao visited Russia. At a meeting with the Chairman of the Government of the Russian Federation, it was decided to start negotiations on the construction of not only the third and fourth power units, but also the next ones, which can be located not only at the Tianwan site, but also at others.
As for Turkey, now there is an agreement signed 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 proposed to 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 of $20 billion and even more revenue from the electricity it generates. This project says that Russia with its nuclear program comes to Turkey for about 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 exploration is underway. Rosatom is constructing the first two nuclear power units on the territory of Vietnam sites.
At the nuclear power plant in Belarus, design work has already been completed and the construction of nuclear power plants has been launched there at full capacity.
In Bangladesh, in a country that did not have nuclear power, but was experiencing an energy shortage, the government decided to build the first nuclear power plant in 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 in the world, in which Rosatom, not afraid of competition, actively participates. With confidence in its technology, the corporation is looking forward to some of the countries where tenders are currently being held. An example of this is the Czech Republic, Hungary, Slovakia, which are currently holding tenders for NPP construction.
The Bulgarian government stopped the construction of the Belene NPP on the territory of its country, in return offering the Russian corporation the construction of another new power unit at the Kozloduy NPP 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 is already supplying nuclear fuel to South Africa, which are good contracts.
Recently, Rosatom State Corporation won a tender in the United Arab Emirates for the supply of fuel, the contracts for which will amount to hundreds of millions of dollars. The UAE is currently actively developing programs related to nuclear energy. As for the 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 State Corporation Rosatom has already completed the construction of the first power unit.
For the Rosatom corporation, promising in the international arena can be considered Latin America, a continent on which the Russian side has not yet worked.
The CEO 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 a year in the volume of funds for concluded contracts abroad, and it ends with an estimate of 69 billion US dollars. The corporation not only did not weaken its positions, but on the contrary increased by 40%, although foreign competitors and analysts predicted a two-fold decline. All this was the result of a lot of work, as the market has changed recently, and it was necessary to establish relationships with new partners.
The purchase of uranium deposits abroad was also the result of the work of the past years. When developing global programs for the development of nuclear energy, it turned out that there is a shortage of uranium deposits in the Russian Federation. In the USSR, basically all deposits were located on the territory of the Central Asian republics. A large amount of public funds was 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 in the USA (20% of uranium reserves in the USA). According to preliminary data, all uranium reserves that are located on the territory of the Russian Federation and other countries of the world will be enough for 100 years to provide all nuclear power plants in Russia and all those built by the Russian side in the world.
The State Corporation Rosatom can be called unique, since its achievements include active international development, and, consequently, the 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, such a major development of the company was not even expected. At the moment, we can say that the State Corporation "Rosatom" is out of competition. The company is able to reliably design, build and operate NPPs 10 . One of the most successful areas can be called the construction of the "Tianwan" nuclear power plant 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 activity is the number of signed contracts for the construction of nuclear power plants in the foreign market, and the State Corporation has 21 power units of them, i.e. 21 contracts. No other nuclear company in the world has such a portfolio of orders, which once again speaks of the high competitiveness of the State Corporation Rosatom. The development strategy implies the consolidation of personnel, scientific developments and technologies, which creates for Rosatom a serious amount of competencies that no other company in the world in the nuclear power industry has. The state has set ambitious goals and objectives for Rosatom Corporation: to become a global technological leader through new scientific developments, to organize business in the international arena and to become one of the top three companies in Russia in terms of revenue. All this should be done by 2030. A few years ago, the income reached 5 billion. dollars a 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 considerations 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 in choosing partners and the technologies they use. There is a new trend among the customer countries - the receipt of complex services, i.e. not only the construction of a nuclear power plant, but also the supply of fuel, new joint scientific developments, joint training of specialists. And in this area, Rosatom has competitive advantages. An illustrative 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 establishment of a scientific center. Within this framework, Vietnamese students are already being trained at the Obninsk branch of MEPhI. The Vietnamese colleagues declare that they intend to receive a comprehensive service from the State Corporation Rosatom: fuel supply, training of qualified personnel, joint scientific developments, joint work in the field of improving security systems. According to the General Director of Rosatom State Corporation, 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 claiming 20% of the total volume of NPP construction in the world.
The company is successfully developing such a strategy for entering a new market as "build-own", i.e. BOO (Build-own-Operate). Successful Example- the Turkish market, where the State Corporation enters not for five years, but for the entire 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 newest 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 of 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)
Turkey (4 blocks)
Armenia (1 block)
Ukraine (2 blocks)
Belarus (2 blocks)
Bulgaria (2 blocks)
In connection with the announcement of international tenders for construction, the following countries are promising 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 has stretched across the entire globe. The increase in the number of orders from the State Corporation among foreign partners testifies to the trust in Russian technologies and specialists. All projects conducted and implemented by the State Corporation "Rosatom" belong to the "3-plus" category, which means that the facilities are equipped with active and passive security 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 able to provide services in the field of nuclear energy, and Rosatom State Corporation is in the top three. Previously, colleagues from Europe invited our specialists for cooperation, and 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 on the international market contributes to the successful development of all Russian business abroad.
Internationalization is associated with the crossing of business national borders. In connection with the institutionalization of international economic relations, the reduction of barriers to trade and financial flows, the expansion of transport and communication infrastructure, companies are striving 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 operations consist of exporting, re-exporting goods and services or establishing trade missions.
Export is the simplest and most common exit method. There is indirect and direct export, as well as active and passive. Occasional export, or passive export, is distinguished by the frequency of transactions, i.e. the firm enters the market from time to time, in accordance with the objectives of the organization or when receiving an order from a foreign client. With active export, the company expands the sales of its products in a particular market. The company manufactures products in the domestic market, but adapts to the needs of the foreign market. Such a strategy involves some changes in the policy, tasks, structure of the organization. When exporting products independently, the company faces additional costs and risks, which can be offset by savings on paying for intermediary services. An advantageous difference is the possibility of control over the exported products by the manufacturing company.
The enterprise may use the services of foreign distributors or agents endowed with exclusive or limited rights represent the manufacturer in a particular market.
The second stage is 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.).
The enterprise can buy foreign licenses. The licensor provides the licensee for a fee to use trade secrets, trademark, patent. Thus, the exporting manufacturer gains access to the external market, optimizing risks. Another way is contract manufacturing, where the production of goods 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 a foreign market, reduces risks and facilitates the possible creation of a joint or own enterprise in a foreign market.
Franchising is a common form of licensing that sells a trademark and a well-established production network.
- - partial or complete relocation of production, use of distribution channels in a foreign market (joint production, joint research activities, etc.).
- - creation of a joint venture (JV) and a marketing system abroad.
Establishing a joint venture is another way to enter a foreign market. The creation of a joint venture may be a necessary condition for entering a foreign market due to government policy, or a source of financial, material, and managerial resources.
The last stage is the internationalization of the enterprise. 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 the foreign market through the creation of an assembly or manufacturing enterprise abroad. A company's direct investment may be the result of low cost of raw materials, labor, government incentives in the foreign market. Formation of 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, 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 not insured in any way against the deterioration of market conditions in the foreign market, changes in the exchange rate, expropriation of property in cases of political upheavals in the country.
If penetration into a foreign market is associated with high costs and risks, or the national market is not fully 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 share costs and risks between companies, provide access to a new market, increase market share, receive government orders, enter into alliances with state-owned companies, gain access to or exchange technologies. Strategic alliances can be in the form of joint production or marketing, joint research and development and technology exchange, mutual exchange of shares, joint venture, creation of a dependent company 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 alliances without equity participation. Three conditions define strategic alliances: two or more companies of different nationalities are trying to achieve a set of common goals previously agreed, enterprises have control over the alliance and a share in the product being created, partners constantly contribute to one or more areas of the alliance. The strategic alliance helps to reduce inter-company disagreements, promotes active cooperation of independent organizations to achieve competitive advantage all partners, or may act as a temporary agreement. The strategic alliance is one of the most flexible methods of cooperation. It can be concluded within the framework of the company's interaction with: suppliers, consumers, competitors, an enterprise producing a similar product in another market or producing a different product in the same market, a non-profit organization, the state, a university, etc. A strategic alliance is distinguished by a greater degree of inter-firm integration from service or licensing agreements, franchising, technology exchange agreements, outsourcing, or joint research work.
Technological companies producing a knowledge-intensive product face an important choice of 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 to quickly get the missing resources, technologies, skills, because. several companies have more opportunities to develop competitive advantages within the same organizational structure. Second, companies become flexible and reduce their asset liabilities. In a technology-driven marketplace, innovation determines a company's success. An enterprise loaded with obligations and high costs of 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 the partner's corporate culture. It is possible to transfer strategically important knowledge and skills that it will be difficult or impossible for a company to obtain alone, the creation of new technologies. Fourthly, 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 goods and compliments are produced according to uniform standards.
Thus, strategic alliances enable its participants to access a new market, increase return on investment, access to resources, necessary technologies and knowledge, achieve efficiency through economies of scale through the rationalization of production, open up new growth opportunities that are unattainable alone. The creation of a strategic alliance enables the company not only to enjoy the existing advantages, but also to quickly use the opportunities of other companies Ying Zhang & Sergey Filippov, Internationalization Strategy of Chinese Companies in Europe, 2009. abroad and the conclusion of 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 aim of: access to resources, market, assets, achievement of efficiency |
Strengthening positions in a particular 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, 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 a change in the strategy of the enterprise in the course of its development. foreign economic activity. With the transition from one method of foreign economic activity to another, there is an increase in the riskiness of the operation, an increase in the company's involvement in foreign activities, control over foreign operations increases, and return on investment increases.
There are different schemes of business internationalization. With a staged approach, the company actively develops its activities within the country, and then successively moves to foreign markets. Two economic models determine the staged development of a business:
- 1) Theory life cycle product (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. The introduction of the product occurs simultaneously at home and abroad, as the transition to a global strategy. The product goes through three stages of maturity. First, a technologically new product is produced in a developed country. At the stage of maturity, mass production of goods is being established. The company seeks 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 the foreign economy, then it is possible to import the goods into the domestic market. At the last stage of the product life cycle, manufacturing process becomes standardized and more labor-intensive than knowledge-intensive. Production moves to developing countries and covers all demand for products.
The model refers 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 close in cultural, political, economic, geographical, etc. features. The firm starts its overseas operations with exports and gradually moves towards more intensive operating models. Further, the company gets 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 consistent introduction of the company to foreign markets and conclude that the main obstacle to the international development of the enterprise is the lack of experience and knowledge about the foreign market. The models assume the following development scheme: sales in the domestic market, export through an intermediary, opening of a trading subsidiary, organization of production abroad. The order of the company's entry into foreign markets is also determined. First, investments go to a similar market, then more remote. According to the models, the company begins to enter the foreign market only after reaching the maximum expansion in the domestic market.
Limitations on the use of models come from the changing conditions of today's markets. Models determine the sequence of a firm's entry into the market and methods of internationalization. They do not take into account such opportunities as franchising (associated with relatively less risk, the ability to cover and control a larger share of the market), licensing (characterized by less investment and the possibility of significant market control), strategic alliance and other market transactions. The model also does not determine the motives for internationalization and the factors that determine just such an order for a company to enter 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 start international activity with foreign direct investment, rather than exporting products. Company internationalization models
http://www.webstarstudio.com/marketing/theor/gos/48.htm. According to the model, a company must have three advantages for foreign investment:
- - the advantage of ownership (as a result of owning more profitable tangible and intangible assets). The monopolistic position of the company, resource security, ownership of patents, trademarks, etc.
- - location advantage (as a consequence of the economic characteristics of the other country). Relatively low cost of production factors, marketing of products, guarantee of property protection, etc.
- - the advantage of internalization (as a consequence of production within one company).
According to the theory, a firm is included in international activity, having three interconnected conditions. The enterprise has distinctive advantages or specific factors in relation to its foreign competitors, which contribute to its competitiveness. The company has a specific location factor, which allows it to benefit more from the use of assets abroad than in the home market. It is more profitable for the enterprise to use the existing advantages on its own than to sell or lease to another company. The theory is based on the premise that internationalization is driven by a company's desire to use existing resources in large markets and gain access to new assets. It follows from the theory 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 that are sufficient to cover the additional costs and risks associated with foreign operations. The considered theories of internationalization were developed by economists on the examples of Western companies. Firms in developed countries have stronger competitive advantages in the home market prior to entering foreign economic activity. Also, the main motive for the international activity of such companies is a relatively small national market. The dominant factor in the beginning of foreign economic activity is the desire to sell excess resources, 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.
A successful example of companies pursuing different motives and goals of internationalization changes the perception of the process of internationalization. Enterprises can quickly move from one method to another, or skip one of the stages of the internationalization process. An example is the foreign economic activity of the Chinese company Huawei, which is discussed below.
Economists are trying to explain the phenomenon of MNCs in developing countries using various theories of business internationalization. Companies enter the markets of developing countries, because. have comparative competitive advantages relative to domestic firms and MNCs in 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 a lower cost; 2) production of standardized products, the release of which does not require additional capital investments; 3) FDI affiliates of developing countries are 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. The 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) to carry out developments applicable in this economy, using less R&D costs; 3) upgrade 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 level. Consequently, a company can expand its activities to regions more distant in geographical, cultural, technological aspects only when it has adopted international business experience, acquired the necessary skills and modern technologies, and established international relations.
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.
These theories are applicable to investment in developing countries, but do not explain the nature of Chinese investment in developed economies.
The development of telecommunications, infrastructure, production technologies are changing the business environment and require faster and better strategies for companies. Cultural, economic, social barriers are being erased, 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 cannot be distinguished by innovation, high productivity, market power, technology or brand. The internationalization of such companies is mainly aimed at acquiring missing assets for quick access to the foreign market and strengthening the company's position in the domestic market. For example, Chinese enterprises are striving for global research and development activities to improve their knowledge and create development opportunities abroad, overcome the limitations of national legislation and the country's business environment. Such restrictions include: regional protectionism (restrains the development of the enterprise and does not allow achieving economies of scale); limited 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 been following 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, customer loyalty, distribution channels, management experience, natural resources.
This strategy of the company is determined by the development of technological production, transport and communication infrastructure, the increasing influence of global market players. Trade liberalization leads to tougher competition in the domestic market of the enterprise.
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 opportunities, 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 reaches more than 70% of export sales. Such enterprises withstand the competition of large international companies due to the quality and added value of products. Applying innovative technologies, developing a new design, firms seek to understand and satisfy the needs of foreign consumers. Companies compete in niche markets, are flexible and able to quickly reorient production.
As opposed to staged development, enterprises can pursue an active internationalization strategy. By creating alliances to promote marketing, sales, production, acquisition of assets, companies create additional value for their product. Let us consider several motives for the foreign economic integration of companies in developing countries.
Striving for the acquisition of foreign resources through global cooperation.
Examples of companies in developing countries expand the understanding of the internationalization of business. Enterprises that entered the market late and strive to catch up with their competitors. The company has the following characteristics: 1) historically, it entered the market of the industry 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 offer few benefits, and link building strategies and the ability to take advantage of existing market conditions are key. Examples are companies from 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 21 st Century Globalization, Asia Pacific Journal of Management, 23 , p. 5-27. The basis is the creation of global connections, benefiting from existing competitive advantages, the application of new knowledge, technologies, the creation of new competitive features of products. Internationalization contributes to 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. Constantly interacting with foreign companies or organizations within the country or abroad, the enterprise acquires technological development opportunities, gains access to market information, acquires modern equipment, and participates in the creation of new knowledge and technologies. However, the company's activities are not focused on acquiring new knowledge, but on the rapid adaptation of existing technologies.
Companies in developing countries to achieve competitive advantages, modern technologies use the method of internationalization of research activities. 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.
The global oligopolistic market can influence how and where an enterprise's investment is 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 seeks to create or find a niche in the market that is not occupied by world leaders. The company is looking for opportunities to join the strategy of a large MNC. Through the licensing of new technologies, the creation of joint ventures, and strategic alliances, the firm acts as a kind of "advantageous addition" to the development of a foreign company. The model of 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 developing country company is beneficial for a foreign enterprise. Saturating the market, the company gets the opportunity to use the financial and non-financial programs of the host country and government programs in China.
The company is actively increasing its presence in developing countries, using its main asset - the ability to establish a relatively cheap production. Gradually increasing its competitiveness, increasing the volume of production, building a positive reputation, the company seeks to overcome institutional restrictions and trade barriers on the way to independently enter the markets of developed countries.
Competition and the desire for a larger market share determine one way or another of internationalization. The firm decides whether to cooperate with its main competitors, or to accumulate international market assets to achieve competition. In the oligopolistic market, the situation is presented in table No. 2.
Table number 2
Oligopolistic market and internationalization strategies.
In the first case, the company seeks to acquire the necessary resources through cooperation with competitors in the external market and avoids direct competition.
The third quadrant presents a situation where a company cooperates with Western MNCs in the domestic market. This allows the use of national innovation centers and the main competitive advantages of the enterprise: the ability to hire labor force relatively cheaply, to participate in national programs to support the industry.
In Quadrant 2, the company's strategy includes competing with foreign companies. In the global market, companies in developing countries face fierce competition from leading brands.
In the fourth quadrant of the table, companies face strong competition in the domestic market. The enterprise competes with the world giants of the industry and domestic rivals for national resources (capital, human labor) in the market of a developing country. Many companies use their domestic manufacturing centers to manufacture additional components, semi-finished products and finished products for international transactions. The use of domestic production centers of the company is beneficial in terms of favorable national legislation and relatively lower costs. At the same time, when companies reach 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 market.
The integration processes described in the table help to understand the process of internationalization of companies in developing countries, their rivalry with world leaders in the oligopolistic market.
Companies can invest in 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 competitive advantages in the domestic market.
To explain the increasing investment of companies in the economies of developed countries, we will abandon two assumptions: 1) companies in developing countries invest only in economies similar in 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 you understand how a company decides where 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 FDI motives of companies, we introduce two characteristics:
- - the level of competitiveness of the enterprise in the home market;
- - the level of socio-economic development of the country of investment.
The first factor determines the competitiveness of the company in relation to competitors in the home market. A company achieves strong competitive advantages when it becomes a leader in the domestic market.
Another factor determines the characteristics of localization. Possibility of acquiring resources and knowledge in the implementation of 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, productivity factors.
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 #3)
- 1. The advantages of localization can be applied to large MNCs that have achieved a significant competitive position in the home market and FDI in developing countries in order to use 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, expanding the sales market, but at obtaining new managerial and technological knowledge. Firms are realizing that in addition to the home market, they need continuous technological improvement to maintain their competitiveness.
- 3. Knowledge acquisition strategy. Companies are forced to enter foreign markets due to high costs and competitive pressure in the domestic market. An enterprise invests in a country characterized by a high level of socio-economic development in order to acquire strategic assets necessary to strengthen its competitive position in the home market. The internationalization strategy is temporary, as after its adaptation and obtaining the necessary resources, the company leaves the foreign market and fully concentrates on the domestic market.
- 4. The strategy of using differences in the 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 the available resources. Internationalization is defensive in nature.
The proposed model can be considered in dynamics, i.e. as the life cycle of the company can change development strategies. (Table 3 shows arrows indicating possible changes in the company's strategies.) For example, the internationalization of an enterprise may be the result of a knowledge acquisition strategy. After achieving its goal and strengthening its position in the home market, the company can shift to a competency-based strategy and FDI in less developed countries where it can dominate the foreign market.
Table No. 3
Theoretical foundations of the theory of internationalization
telecommunications market internationalization china
