Navalikhina_Mosina_Morozov_midterm-2


Machinery construction industry in Russia: political connections and the global scope


Graduate School of Management
Saint Petersburg
14.03.2013
Maria Navalikhina, MIB – 2014 Alla Mosina, MIB – 2014 Daniil Morozov, MIB – 2014
The paper provides with an overview of Russian firms operating in the machinery construction industry and traces the linkages between the political connections of the firms and their international activities.

Introduction
Russia inherited a well-developed machine-building sector from the Soviet Union in 1991. Machine building is one of the leading industries in the country, which is concentrated mostly in Moscow, St. Petersburg, the Urals, Volga region, and Westerns Siberia. It provides all other industries with equipment and machinery. The share of machine building in Russian economy reaches almost 30%. Machine building industry is characterized with a dynamic and complex structure which includes over 70 branches and with a deep specialization together with a wide cooperation of production. The most strategically important branches in the machinery industry are electronics, computers, robotics, instrument building, agricultural and transport machine building, railway cars manufacture, aircraft building, ship building etc.
The paper analyzes about 40 multinational companies operating in the machinery industry in Russia in order to examine their activities in the sector, to analyze relationship between these companies and the Russian government and to conclude about the influence of the political issues on the international activity and international expansion of the companies.

The multinationals which are selected for the further analysis can be divided into three big groups: Russian military construction, space and nuclear power firms, foreign automotive firms which have production facilities in Russia together with local cars producers and heavy-machinery construction firms which were established in the USSR period and were integrated into holdings in the beginning of 2000s. Each group is analyzed separately.
Group 1: military, space, nuclear power
The first group represents the companies which are related to the military, space and nuclear power construction, or, in other words, those which operate in the strategically important field in the global aspect. Until recently, the activities and operations of these enterprises as well as the location of their facilities was a state secret, but nowadays the military-industrial complex is being under a serious reconstruction due to the conversion which has opened great opportunities of usage of the scientific and technological potential for the economics needs of the Russian Federation.
The multinationals from this group are listed below.
Academician M.F. Reshetnev Information Satellite Systems
Country Not concrete country, but EUTELSAT (European Satellite Communications)
Year of entry 1995
Industry/ business area Satellite design and manufacture
Entry mode Joint project. ISS-Reshetnev in tandem with Alcatel Espace won a tender competition announced by EUTELSAT (European Satellite Communications) for the design and manufacture of the telecommunication satellite SESAT. The satellite was expected to satisfy the need for fixed communication in central and Eastern Europe. The integration of Russian and European technologies let a new satellite come true.
Motives The first contracts laid the foundations for integrating Russian and western technologies which for a very long time had been advancing separately, but nevertheless presented a certain challenge to each other. The idea was to take the best from each technology and create a brand-new product which would surpass both Russian and western achievements.
Firm specific advantages used on the foreign market The technological and scientific heritage of the USSR developments in the space industry, strong state support.
First mover or follower First mover. It was the first contract between the Russian company and a well-known international organization. The main competitors are foreign companies (mostly American and French ones), in Russia - Khrunichev State Research and Production Space Center.
Type of state involvement in the process of internationalization As it’s a state company, the state participation was definitely direct.
Evaluation of the success of the internationalization The internationalization was successful. SESAT was successfully delivered into orbit on April 18, 2000. It was Russia’s most powerful telecommunications satellite and the first satellite with a 10-year lifetime. The company entered the global market, although it’s market share is only 2,9%.
The JSC “Academician M.F. Reshetnev “Information Satellite Systems“ is Russia’s leading space enterprise specializing in the design, development and manufacture of high performance spacecraft and satellite systems. Information Satellite Systems has participated in more than 30 government and commercial space programs and manufactured over 50 different types of highly reliable LEO, MEO, HEO and GSO spacecraft. All the facilities with 8200 employees are situated in Russia. The sales in 2011 – 585,5 mUSD.
State influence: Reshetnev Company is the joint stock company, 100% state ownership. All the members of the board are representatives of government or federal agencies. It is the key executor of the Federal target programs in space industry. In 2009 the company was included in the state list of strategic enterprises. Participate in Federal target programs: State arms procurement program, the Federal Target program "Global Navigation System", Russian Federal Space Program and others.
Almaz AnteyCountry China, Vietnam, Southern Korea
Year of entry 2002
Industry/ business area air defense missile systems
Entry mode Export.
Motives In fact the enterprises which in 2002 formed the Almaz-Antei holding had been exported since the 1990s. The receiving in late 1990s several profitable contracts from China, Vietnam, Southern Korea was one of the main impetus for holding creating, which defined the structure and strategy of Almaz-Antey.
Firm specific advantages used on the foreign market The technological and scientific heritage of the USSR developments in the industry, strong state support. The capability to provide the biggest range of air defense missile systems of in the world.
First mover or follower Follower
Type of state involvement in the process of internationalization As it’s a state company, the state participation was definitely direct.
Evaluation of the success of the internationalization The internationalization was successful. Now Almaz-Antei is the 25th top of international defense contractors with the revenue in 2011 of 3.55 billion USD, which exports to more than 50 countries (including China, Vietnam, Southern Korea, India, Algeria, Venezuela, Syria, etc. ).
Almaz-Antey is one of Russia’s major defense companies. It was set up in 2002 through a merger of two historically rival missile houses - NPO Almaz (used to cater to the Air Defense Troops, was most known for its S-300P SAM system) and Antey Concern (specialized in air defense systems for the Ground Troops, including the S-300V). Almaz-Antey is the designated integrator of all air defence missile manufacturers in Russia, for the exception of MANPADS and some short-range specimens.
State influence: Almaz Antey is the joint stock company, 100% state ownership. Some of the members of the board are representatives of government or federal agencies. It is the key executor of the Federal target programs in space industry. The company is included in the list of state strategic enterprises. Participate in Federal target programs: State arms procurement program, the Federal Target program "The development of electronic components and radio electronics ", “The development of the military-industrial complex of the Russian Federation” and others.
AtomEnergoMashCountry Different
Year of entry 2007
Industry/ business area machinery
Entry mode Export; joint venture with Alstom Power (French company) with 51% capital of Atomenergomash and 49% - Alstom, acquisition of Arako (Czech company ).
Motives The international expansion was one of the strategic goals of the company.
Firm specific advantages used on the foreign market The main advantage is that the equipment produced at the Group's companies was installed at all the USSR’s and its allies’ nuclear power plants. Thus the holding just continued to provide services and equipment to the facilities in Bulgaria, Hungary, the Czech Republic, Slovakia, Finland.
First mover or follower Follower. The holding continued the business of the companies which it consolidated.
Type of state involvement in the process of internationalization As it’s a state company, the state participation was definitely direct.
Evaluation of the success of the internationalization The internationalization was successful. Now Atomenergomash controls 55 power engineering companies including research institutes, production facilities, engineering and service companies in Russia, Ukraine, Czech Republic, Hungary, Kazakhstan, Bulgaria, and Morocco.  Equipment produced at Atomenergomash Group enterprises is installed in more than 20 countries worldwide. Along with traditional markets (Russia, CIS, Baltic States, Eastern Europe) the Company’s priority markets are those of Asia-Pacific region, Africa, Middle East and Latin America. The sales on the international market – 12,5% (197,5 of 1591,5mUSD).
Atomenergomash Group of Companies was established in 2006 as a subsidiary of Federal Agency for Nuclear Power. Holding company combined several manufacturers of nuclear power plants' components.  Today, it is one of the leading power machine building holdings in the Russian Federation. It provides efficient technological solutions for the nuclear and thermal power sectors and for the oil and gas industry. The company includes more than 14 500 employees.
State influence: Atomenergomash is the joint stock company, 85,7% state ownership (70,5%- Atomenergoprom, 9,7% - TVEL, 5,5% - Tekhsnabexport). The mission of the company reflects three strategic initiatives of state corporation "Rosatom", including an independent strategic initiative HEA “The creation of a stable EMC of a sufficient scale” and the two cross-divisional strategic initiatives “Global expansion of VVER technology platform” and “The share of nuclear power generation in Russia increasing”.
Center for ground-based space infrastructure facilities operation
Country No particular country
Year of entry 1995
Industry/ business area Space
Entry mode Exported to joint project Sea Launch (spacecraft launch service that uses a mobile sea platform) of Norway, Russia, Ukraine and the United States (managed by Boeing with participation from the other shareholders). In the project Center created technological equipment and technical systems on the launch platform (SP), the Assembly and Command Ship (ACS) and the base port.
Motives Strategic state space initiatives.
Firm specific advantages used on the foreign market State support and investments.
First mover or follower Follower
Type of state involvement in the process of internationalization State initiative.
Evaluation of the success of the internationalization The internationalization seems to be successful. Now the Center participates in different international programs (“Land Launch” with Ukraine and the USA, “Soyuz at GSC” with France, “Baiterek” with Kazakhstan, “KSLV” with Korea, “Brazilian Project”, etc.) and cooperates with NASA, European SA, Canadian SA, Japanese SA, Ukrainian Federal SA and Kazakhstan National SA.
Center for ground-based space infrastructure facilities operation was established with the Russian Space Agency in 1994. The profit of the company in 2011 was 639 mUSD. The main functions of the company are the following: operation of Baikonur Cosmodrome, R&D projects for the improvement of the ground-based space infrastructure, racket fuel provision, space planning etc.
State influence: The Center is the subdivision of Federal Space agency. The main partners and contractors are the state agencies (Ministry of Information Technology and Communications, Russian Space Forces, Federal Space Agency), state enterprises and academic institutions (Khrunichev State Research And Production Space Center, Space Research Institute, etc.). It provides services for launching space vehicles under the Federal Space Program, the federal target program "Global Navigation System" in the interests of national defense and security of the country, international cooperation programs on commercial projects.
Khrunichev State Research And Production Space Center
Country USA
Year of entry 1993
Industry/ business area Space industry
Entry mode Joint venture. Lockheed Khrunichev Energia (LKE), a joint Russia–U.S. venture was established by the Khrunichev Space Center and the Energia Space Rocket Corporation on Russia’s side and Lockheed Corp. on the U.S. side. In 1994 due to merger between Lockheed and Martin Marietta it was transformed to the International Launch Services Inc. with the Khrunichev holding the majority interest.
Motives This step offered the Proton rocket launch vehicle in the international market.
Firm specific advantages used on the foreign market The soviet space industry academic and technological heritage, state support.
First mover or follower First mover
Type of state involvement in the process of internationalization As it’s a state company, the state participation was definitely direct.
Evaluation of the success of the internationalization The internationalization was successful. Since 1996, ILS has launched most commercial satellite platforms and worked with all major satellite operators. And Khrunichev now holds international projects with USA, Canas,Japan, Southern Korea, states-members of European Space Agency
The Khrunichev State Research and Production Space Center was founded on the basis of the Khrunichev Machine Building Plant and the Salyut Design Bureau by Presidential Decree in 1993. The goal was to make the production business and foreign economic relations of major space industry companies more efficient and to more actively promote Russian technologies in the international market. Khrunichev is the major Russian producer of spacecraft and space-launch systems, including the Proton and Rokot rockets. There are 43 000 in Russian and Kazakhstan (Baykonur).
State influence: Khrunichev is the Federal State Unitary Enterprise, thus is completely owned and governed by the State.
MIC NPO MashinostroyeniyaCountry Vietnam, Bulgaria
Year of entry 1977-1979
Industry/ business area missile systems
Entry mode Export
Motives Government of the Soviet Union decided to supply some friendly countries with mobile coastal missile systems.
Firm specific advantages used on the foreign market During the soviet time the members of the communist camp didn’t have any alternatives to the Soviet military production. Then the strong soviet military heritage, government investments and the fact that the cooperation in this field is also defined by the politics (e.g. countries of Latin America or Middle East prefer to cooperate with Russia instead of the USA) played the crucial role.
First mover or follower First mover in its industry
Type of state involvement in the process of internationalization Direct, it’s the state company.
Evaluation of the success of the internationalization The internationalization was successful. Now the company exports to Vietnam, Bulgaria, Syria and Korea, Far and Middle East, South and South-East Asia, Africa, South America, Europe
MIC NPO Mashinostroyeniya is one of the leading space and rocketry companies of Russia. JSC MIC Mashinostroyenia, as a prime contractor in the multi-discipline cooperation, provides the National Armed Forces with advanced military equipment and collaborates with foreign partners in the military and technical fields. The firm’s revenue 464.3 mUSD in 2011.State influence: MIC NPO Mashinostroyeniya is the state-owned corporation. It provides Russian Armed Forces with the latest types of military equipment, carries out military-technical cooperation with foreign partners and is strategically important for Russian Federation.
OboronpromCountry different
Year of entry 2002 – since the company was established
Industry/ business area Airspace industry
Entry mode Export
Motives The subdivision of the holding had already been involved in international cooperation, Oboronprom just joint them.
Firm specific advantages used on the foreign market There are no competitors in Russia, because of industry consolidation
First mover or follower Follower. Continued the cooperation of its subdivisions
Type of state involvement in the process of internationalization As it’s a state company, the state participation was definitely direct.
Evaluation of the success of the internationalization The internationalization was successful. Now the company exports to more than 110 countries.
Oboronprom is a Russian aerospace holding company. The company is involved in helicopter production, engine production, air-defenсe systems, complex radio-electronic systems and leasing. It is part of the corporation "Russian Technologies” and the parent company of JSC Russian Helicopters, JSC United Engine Corporation, JSC Defence systems. The revenue of the company was 7704,8 mUSD in 2011.
State influence: JSC Oboronprom is the joint stock company, 100% state ownership (27,8%-RF, 58,3%-Russian Techologies, 13,9 - other state companies). Some of the members of the board are representatives of government or federal agencies. The company is provides the machinery for Russian Arms, has the strategic value and receives state investments (e.g. 68,7 mUSD in 2011). In 2006 the company was included in the state list of strategic enterprises.
RSC EnergiaCountry different
Year of entry 1978
Industry/ business area Space industry
Entry mode Start wide international integration for the implementation of joint space programs (Czechoslovakia, Poland, Bulgaria, Hungary, Vietnam, Cuba, Mongolia, Romania, France, India, Syria, Afghanistan, Japan, Great Britain, Kazakhstan, Austria, Germany).
Motives State strategic goal to strengthen its position in space and develop the international cooperation with allies in this field.
Firm specific advantages used on the foreign market The company became the ancestor of almost all areas of the national rocket and space technology.
First mover or follower First mover
Type of state involvement in the process of internationalization As it’s a state enterprise, the state participation was definitely direct.
Evaluation of the success of the internationalization The internationalization was successful. Now the company participates in different joint projects: ISS project involving 15 countries, Sea Launch (Ukraine, USA, Japan, Russia), Land Launch (Ukraine, USA, Russia). The EU (ESA) and USA (NASA) are the main foreign customers.
JSC RSC Energia is active in the space industry since 1946. The company became the ancestor of almost all areas of the national rocket and space technology. Today "RSC" Energia " is a leading Russian rocket and space venture and works to create automatic space and missile systems (launch vehicles and inter-orbital transfer), high-tech systems for various applications for use in non-space sectors. The enterprise initiated practically all lines of activity related to national rocket and space technology. Its efforts are focused on building automatic space and rocket systems (launch vehicles and orbital transfer vehicles); high-tech, multi-use systems to be used in areas other than space. The revenue of the company was 641,8 in 2011.
State influence: RSC Energia is the joint stock company, 100% state ownership. Some of the members of the board are representatives of government or federal agencies. In 2004 the company was included in the state list of strategic enterprises.
Tactical Missiles Corporation JSC
Country No particularly
Year of entry 2002 – since the establishment
Industry/ business area weapon manufacturing
Entry mode Export
Motives Tactical Missiles Corporation since its creation used and developed the already established international network of its subdivisions - Zvezda-Strela and others.
Firm specific advantages used on the foreign market The already established international connections, soviet military heritage, state support.
First mover or follower Follower
Type of state involvement in the process of internationalization As it’s a state enterprise, the state participation was definitely direct.
Evaluation of the success of the internationalization The internationalization was successful. Now the corporation has various export contracts with such countries as India, Algeria, Syria, Indonesia, France, Turkmenistan, Vietnam. The revenue from export was 848.5 of 1209.8 mUSD total.
Tactical Missiles Corporation is the major Russian weapon manufacturer, founded on the basis of Zvezda-Strela in 2002. Strategic targets which lead to the Corporation establishment consisted in keeping and developing of missilery’s research and production capacity, supplying national defense capability, resource mobilization needed for highly effective guided missiles and air-based, ground-based, sea-based weapon systems production, also in strengthening military positions of Russia in world armament market. 22 000 employees work on the enterprises of the JSC.
State influence: Tactical Missiles Corporation is the joint stock company, 100% state ownership (Federal Agency for State Property Management (Rosimushchestvo)). Most of the members of the board are representatives of government or federal agencies. The company was included in the state list of strategic enterprises.
TsSKB-Progress
Country International space programs
Year of entry 1999
Industry/ business area space industry
Entry mode Export of services. The subdivision of the holding had already been involved in international cooperation (e.g. in 1990s several Indian satellites were launched). In 1999 4 space crafts of SS/Loral (USA) were launched.
Motives The success of previous international lunches, state strategic goal to strengthen its position in space market.
Firm specific advantages used on the foreign market The already established international connections, soviet space heritage, state support.
First mover or follower Follower
Type of state involvement in the process of internationalization As it’s a state enterprise, the state participation was definitely direct.
Evaluation of the success of the internationalization The internationalization was successful. TsSKB-Progress continues international projects.
TsSKB-Progress is a Russian "Federal State Unitary Enterprise" under the jurisdiction of  HYPERLINK "http://en.wikipedia.org/wiki/Roscosmos" \o "Roscosmos" Roscosmos, the Russian Federal Space Agency responsible for space science and aerospace research. It is the developer of the famous Soyuz-FG rocket used for manned space flight, as well as Soyuz-U used for launching unmanned probes.is one of the leaders of space industry in development, manufacturing and operation of the middle-class launch vehicles. The LV built by the enterprise are used for manned and cargo launches to ISS, as well as for launches of foreign payloads.
State influence: TsSKB-Progress is the Federal State Unitary Enterprise, which means 100% state ownership. Some of the members of the board are representatives of government or federal agencies. The company was included in the state list of strategic enterprises.
Summary
This group of the companies obviously gets the strongest and the most intensive governmental support. They are all owned by the government; many of them have politicians and members of the Russian government in the board of directors. Some of the companies from this field have production facilities not only in Russia but also abroad; they collaborate with foreign partners in the developed (the USA, France, the United Kingdom, Germany etc.) as well as in the developing countries (China, Algeria, Latin America, ex-members of the Soviet bloc etc.) and participate in many joint multinational projects (for example, International Launch Services of the Proton rocket in the USA or the participation in the International Space Station project etc.). More than a half of the production of these companies is exported to the countries with developing economies such as India, China, Vietnam, Venezuela, Algeria and others. This is often explained by the political connections and relationships being established long ago in the USSR period. All in all, the international scope of the activities of these companies is huge and this policy is strongly supported by the Russian State legislation. The main directions here are the following:
Human resources support (federal educational and retraining programs, social perks and benefits for the workers of the military-construction and high technologies complex);
Providing the companies of the sector with all the necessary infrastructure and giving them a status of scientific centers;
Informational support (providing with the access to the Russian and international scientific funds and systems, organization of exhibitions of their production samples etc.);
Financial support of the R&D projects, reconstruction projects; governmental loans and bonds issuing;
Attraction of foreign investments and advanced technologies into the sector;
Technical collaboration with foreign partners and investors.
To sum up, it can be concluded that the companies which operate in strategically important fields such as military complex, space industry and nuclear power are:
All owned by the Russian government;
Mostly were established in the Soviet times and reconstructed in the 90s, being converted into JSCs but with governmental representatives in the boards of directors;
Export their production abroad and participate in many joint projects with the foreign colleagues;
Interested in foreign investments and this interest is highly supported by the Russian government;
Their international activities and expansion are also supported by the Russian government.
Group 2: Automotive construction
The second group of the companies is presented by the manufacturers of the automobiles in Russia. Mostly these are foreign companies which have their own facilities here, but there are also Russian producers in the list. The automotive construction in Russia is very attractive for the foreign investments due to several factors, such as lower costs of the labor force and production together with a positive demand for the foreign cars and a growing income level in Russia. The main players of the field are listed in Table 2 below.
Avtoframos
Country Belarus, Kazakhstzn, Ukraine.
Year of entry 1998
Industry/ business area Car manufacturer
Entry mode Export
Motives Existing demand, production capabilities
Firm specific advantages used on the foreign market Great experience in the other markets
First mover or follower Follower
Type of state involvement in the process of internationalization Firstly was created as the joint venture of Renault and Moscow government, so it helped the company to enter the market. In 2012 was fully bought by Renault.
Evaluation of the success of the internationalization The internationalization was successful due to the provision of high demand with its products
JSC "Avtoframos" - Russian carmaker. Was created as a joint venture between Renault and the Moscow government, but by the end of 2012, has been completely bought out the French. Full name - Open Joint Stock Company "Avtoframos". The plant's capacity - 160 thousand cars a year. The headquarters and production are located in Moscow.
Founded in 1998. Then part of the joint venture was entered much of the territory of "Moskvich" (formerly unfinished engine plant). In 2005, the company began assembling cars Renault complete cycle.
In 2010, at the facilities of auto plant began production of the hatchback Renault Sandero, in the fall of 2010 - Model Fluence and Megane (by SKD). In 2012 began production of crossover Renault Duster. From 2012, it was planned to cease production of the Renault Logan in connection with his transfer to "AvtoVAZ".
In 2004, the French company bought out the part of the Moscow government in "Avtoframos" by acquiring a 26% stake. In 2006, Renault increased its stake to 94.1%, and in November 2012 to buy out the company. The total investment of the French in "Avtoframos" by the end of 2012 amounted to 480 million eurosAvtotor Group
Country Foreigner investor into the Russian economy
Year of entry 1998 - contract with BMW
Industry/ business area An assembly plant of automotive manufactures – BMW, Chevrolet, Hummer, Kia.
Entry mode investment from BMW, external supervision
Motives To minimize costs, particular transportation ones
Firm specific advantages used on the foreign market High quality of production, usage of cheaper resources
First mover or follower Follower
Type of state involvement in the process of internationalization Tax support by regional authorities
Evaluation of the success of the internationalization Internationalization of BMW enforced further company’s cooperation with other foreign enterprises
"Avtotor" - a factory for assembling cars in the Kaliningrad region. Founded in 1996. In 2008, he was one of the largest companies in Russia for production and assembly of car brands - BMW, Chevrolet, Hummer, Kia.
In August 2003, General Motors signed a set of agreements on the organization of production of GM car factories in Kaliningrad "Avtotor".
In 2006, he held the 69th place in the list of 200 largest Russian private companies by the magazine Forbes. The company's revenue in 2011 amounted to about 4 billion euros (own estimate).In July 2009, the plant capacity "Avtotor" began production SUV BMW X5 and BMW X6.
At the end of May 2010 "Avtotor" announced the launch of production of the BMW 5 Series 2011 of the coming of the German car kits. In Russia Chery car assembly began in 2006 at the Kaliningrad plant "Avtotor". Chery car sales began in Russia in May 2006. In March 2008, "Avtotor" stopped assembling cars Chery. The main reason is called failure to provide special benefits economic zone on the duty-free import of components.
Currently, work is underway to expand the range by vehicles with larger capacity. "Avtotor-Trucks" and its distributor "Avtotor Vans" offers a wide range of additional services to the car's special add-ons, such as - vans (manufactured goods, isothermal) loading platforms with different manipulators, hauler, and other add-ons.
AvtoVAZ Group
Country Export to over 70 countries. Mostly CIS members, Eastern Europe, Uruguay, Northern Korea. Assembly plants in Ukraine, Kasakhstan, Egypt
Year of entry Since 1970s
Industry/ business area Automobile manufacturer. It produces the Kalina, Lada 110 and the Niva off-road vehicle
Entry mode Export
Motives To satisfy the demand in countries which mostly have the same economical situation and structure of incomes of citizens.
Firm specific advantages used on the foreign market Wide experience, particular attributes of its products
First mover or follower Follower
Type of state involvement in the process of internationalization JSC formed out of a state company; strong financial and tax support by state, governmental subsidy loans program
Evaluation of the success of the internationalization Exported amounts of cars increased last years due to novel models which was appropriate especially for CIS countries
In contrast to the Russian market, where sales of LADA cars in January-March, down 15%, the supply of "AvtoVAZ" for export showed a significant increase. Implementation of LADA in the I quarter increased by 84.5% to 16,474 vehicles. How to tell "AUTOSTAT" in the press-center of "AvtoVAZ", in the first three months of 2012 the largest share of exports of the company belong to Kazakhstan (42%), Ukraine (28%) and Azerbaijan (16%).
As for the model structure of exports, demand varies by market. Thus, the main exports - 90% - of LADA cars in Europe have on the family of LADA 4x4. The largest volume of exports to other CIS countries accounted for LADA Kalina - 62%. In the CIS countries most in demand family LADA Samara (37%) and LADA Priora (28%). It should also be noted that in March 2012, began shipping cars LADA Granta to the CIS, the new ships now produced in all trim levels.
As described in the press center of the AvtoVAZ plant is developing a new strategy for the export of cars LADA, which gives remarkable results. It is significant that the growth of export sales of "AvtoVAZ" is recorded for the third year in a row: 42 143 vehicles in 2010, 56 010 - in 2011, 16 474 - for three months in 2012.
More than half of the exports of cars LADA accounts for the CIS countries. Also continued delivery of LADA cars in Europe, where our brand is well-known. Continues AvtoVAZ and promising negotiations for deliveries of cars with companies from other regions of the world. But still the highest sales of LADA accounts for the domestic market. In the I quarter of 2012 in Russia sold 109,388 cars LADA, which fully complies with the company's plans. Business experience in the industry shows that a decrease (in the worst case - stop) exports will inevitably lead to the weakening of the domestic market.
Ford Motor Company
Country Russia
Year of entry Deal since 1907, 2002 – first plant
Industry/ business area Subdivision of American multinational carmaker.
Entry mode FDI, greenfieldMotives To establish its own capacities closer for potential market to decrease costs
Firm specific advantages used on the foreign market International experience, cheap resources and workforce
First mover or follower Follower
Type of state involvement in the process of internationalization Tax support by regional authorities
Evaluation of the success of the internationalization January 2007 - The sales of cars indicate that Ford was in 2006, the Russian leader in sales of foreign brands.January 2008 - Russia among the five largest markets in Europe, Ford c result in 175,793 vehicles sold in 2007. Focus remains the best-selling foreign car fifth consecutive year.January 2008 - Ford in Russia ranked first in terms of sales entities in Russia. The volume of corporate sales of 34,992 cars, well above last year's sales, amounting to 23,357 vehicles.
July 2002 - Ford begins producing near St. Petersburg cars Ford Focus; initial investment was $ 150 million.
April 2005 - Ford opens up outside Moscow's National Centre for distribution of spare parts for maintenance of vehicles Ford, Land Rover and Volvo.
June 2005 - Ford announces plans to increase since January 2006, the power plant near St. Petersburg to 60 thousand cars a year. This required a greater investment Ford to a value exceeding $ 230 million.
April 2006 - The plant near St. Petersburg produces one hundred thousandth car Ford Focus.
April 2007 - successfully started a new business in Russia Ford - a division of Ford Heavy Trucks. Ford Heavy Trucks network includes six dealerships in Moscow, St. Petersburg and Krasnoyarsk.
March 2009 - Began production Ford Mondeo at the Vsevolozhsk plant in the sedan in the six possible customized with a wide choice of petrol and diesel engines, with manual and automatic transmission. By the end of 2009, the share of this model on the Russian market increased to 7.4% in the segment.
May 2010 - In the 77 cities of Russia, there are 120 points of sales and service of cars Ford, including 106 authorized dealers Ford.
October 2011 - a joint venture with equal participation of the parties between Ford Motor Company and OAO «COLLERS" began operating. "Ford Sollers Holding" Ltd. will manufacture passenger and commercial vehicles Ford in the Leningrad region and the Republic of Tatarstan, offering greater choice to Russian buyers.
GAZ Group
Country CIS, South-East Asia, Africa, Latin America.
Year of entry 2005
Industry/ business area GAZ Group produces light and medium-duty commercial vehicles, heavy-duty trucks, buses, passenger cars, construction and road-building equipment, powertrain and automotive components. Subsidiary of Russian Machines Corporation.
Entry mode Export
Motives Demand in the countries, build on existing contract manufacturing relationships
Firm specific advantages used on the foreign market GAZ Group follows global quality standards and has an extensive service system based
on customer-oriented business model. It enables the company to maintain leadership in the commercial vehicles market.
First mover or follower Follower
Type of state involvement in the process of internationalization Financial and tax support by state
Evaluation of the success of the internationalization Company permanently has entered different new markets all over the world, built its own capacities, signed contracts with leaders in this business sphere, so it is quite obvious that internationalization of the company has very successful formation.
January 2006 - The first Ural trucks of GAZ Group were first assembled in Viet Nam, at a Russo-Vietnamese truck assembly joint venture.
March 2006 - The assembly enterprise of Ural India Limited, a joint venture of Ural Truck Plant and the Indian Motijug Agencies Ltd., started operations in India. GAZ Group got down to serial production of the Volga cars with DaimlerChrysler engines.
 
April 2006 - GAZ Group signed an agreement for purchase the DaimlerChrysler car assembly equipment and also the license for making a car on the basis of the Chrysler Sebring/Dodge Stratus platform.  
 
June 2006 - GAZ Group signed a partnership agreement with Renault Trucks for transfer of production of heavy diesel engines of DCi11 to Russia.
 
July 2006 - GAZ Group purchased from the U.S.-based fund of Sun Capital a 100% stake in LDV located in Birmingham (UK), an independent maker of modern light commercial vehicles of the Maxus family.
 
December 2006 - The Likino-based bus plant of GAZ Group and MAN created the first joint city bus model — a low-floor LiAZ-52922 fitted up with German MAN engine of Euro 3 environmental standard. GAZ Group announced signing of a loan agreement whereby a syndicate of independent foreign financial and lending institutions provided a US$ 100,000,000 syndicated loan to GAZ JSC.
 
October 2007 - GAZ Group launched the production of YaMZ-650 diesel engine. The company had bought the license and manufacturing equipment for this model under the brand DCi in 2006 by Renault Trucks.
 GM-AVTOVAZ
Country Russia, CIS distributors
Year of entry 2001
Industry/ business area The company owns a car factory in Togliatti design capacity of 102 thousand cars a year.
Entry mode Is a joint venture founded: "AvtoVAZ" (41.61% of shares), Concern General Motors (41,61% of shares), European Bank for Reconstruction and Development (16.78% of shares).
Motives To become a major player in Russia and CIS regional vehicle markets by producing cars of competitive quality and of affordable prices;
Introduction of the quality culture;
Strengthening of Western companies confidence in Russian business;
Attraction of investments into Russian automotive industry stimulating setting up the Joint Venture in auto components industry.
Firm specific advantages used on the foreign market Implementation of low-cost production and procurement systems, experience, favorable logistics environment
First mover or follower Follower
Type of state involvement in the process of internationalization Financial and tax support by state; investments support
Evaluation of the success of the internationalization As we can see it further every year company’s sales increase and it gained the goals which was set in front of it in international markets
In 2002, 456 vehicles came off the JV's assembly-line, in 2003 – 25,235, in 2004 – 55,150, in 2005 – 51,810, in 2006 – 47,881, in 2007 – 55,052, in 2008 – 54,654, in 2009 – 23,101 vehicles, in 2010 – 36,996, in 2011 – 57,765.
In 2012, 62,981 Chevrolet NIVA vehicles rolled off the line of the JV. This is 9% higher than in 2011.
63,023 vehicles shipped to dealer including 2,744 to CIS countries, again 9% higher than in 2011.
Totally, 469,220 Chevrolet NIVA  sold since the start of production including 34,332  units to CIS countries.
Today, 154 dealers provide Chevrolet NIVA sales in Russian Federation together with 8 dealers and 3 distributors in CIS countries.
The Joint Venture production philosophy is based on lean production concept (GM-GMS system) which is standard for any GM Corporation facility throughout the world. The main element of this concept is how to reduce wastes of all kinds and ensure manufacturing of quality products which is achieved through strict input and output control as well as standardized procedures, personnel training and motivation. From the 1st of July in 2002 the SAP system was introduced at the plant and it is successfully operational ever since. Currently it is being upgraded and developed.
Hundai Motor Manufacturing RusCountry Russia
Year of entry 2010 –plant opened
Industry/ business area Facility of South Korean multinational automaker.
Entry mode FDI, greenfield
Motives Cost reduction, localization, to meet the particular customer needs (Hyundai Solaris)
Firm specific advantages used on the foreign market "HMMR" - the only company with a complete production cycle of foreign car in Russia. "Hyundai Motor Manufacturing Rus" has a high level of localization due to its location in the North-West region of the supplier's automotive components. Experience, InnovationsFirst mover or follower Follower
Type of state involvement in the process of internationalization Financial and tax support by state
Evaluation of the success of the internationalization American Chamber of Commerce in Russia, is a reputable business association, called the plant a better investor in 2010, with the award of an honorary award "Investor of the Year": "... for the growth, visibility and considerable success in the Russian market and long-term intentions of the company, following the highest standards ethics ... ". The company brought with him to the North-West region 11 Korean suppliers, providing a high level of localization company.
2012 – the plant reached full production capacity of 200,000 vehicles per year. The plant provides 5,000 jobs.
This is the first Russian company, which operates in the full production cycle of foreign automakers, ranging from punching the body and ending with the assembly. The plant consists of four main shops: stamping, welding, painting and assembly, as well as the test track, where all the cars are tested. The plant is equipped with modern high-tech equipment, and the highest level of the organization and automation robots.
Using cutting-edge technology based on its own research centers, Hyundai Motor Company is constantly developing and improving the line of cars. St. Petersburg plant releases a new model of car - Hyundai Solaris, designed specifically to meet the requirements of Russian customers, our road and climatic conditions.
KAMAZ Group
Country Export – 37 countries(Eastern Europe, Latin America, China, the Middle East, and North Africa). Assambley plants in Kazakhstan, India, Pakistan, Vietnam. 93 distribution centresYear of entry 1977
Industry/ business area The largest automobile corporation of the Russian Federation. One of world's top heavy truck manufacturers.
Entry mode Export
Motives To satisfy high demand due to its unique qualitative products, costs reduction, establishing relationships with other companies all over the world
A strategic vision of the company’s development: KAMAZ is the national industry leader and a major international player. “KAMAZ is an adaptive, effective, global company”.
Adaptability is an ability of the company to change business parameters depending on market conditions, quickly and flexibly managing the volumes of production, production facilities, the number of employees.
Efficiency is ensuring of balanced economic and financial indicators of profitability, investment activity and an internal rate of return no less than industry average indicators;
Globality is strategic partnerships with the world’s leaders (including manufacturers of components), focusing on the key markets, organization of large-scale productions abroad.
Firm specific advantages used on the foreign market Easy-to-maintain and reliable trucks of high quality with low operation costs and at most competitive prices;
Customers’ all needs are satisfied;
Wide marketing geography – KAMAZ vehicles operate under any road and climatic conditions: in the Northern Pole and in tropics, in deserts and high mountains;
Developed service network in Russia and the CIS, warranty kilometrage of vehicles is up to 75 km.
All these advantages facilitate KAMAZ to improve its production along with the leaders of the world machine building. OJSC KAMAZ pursues an active, balanced and independent price policy on the domestic market first of all focusing on market requirements and optimum price-quality relationship.
First mover or follower Follower
Type of state involvement in the process of internationalization Ownership – the state is main shareholder (49,9% - Russian Technologies State Corporation)
Evaluation of the success of the internationalization KAMAZ became the absolute leader in the class of heavy trucks in Ukraine, Kazakhstan, Azerbaijan, Turkmenistan, and a number of other countries. During 2012 the company produced spare parts to the tune of over 14 billion roubles.
To date, KAMAZ Group includes over 150 organizations located in Russia, the CIS and the far abroad.
OJSC "KAMAZ" is a full-cycle production automaker that combines metallurgical, forging, pressing-and-frame, mechanical assembly, special machine and tool production with all the necessary facilities and enabling the energy in the 16 specialized factories in Russia and the CIS countries, from including 9 - in Naberezhnye Chelny. In addition to development and production, the company is engaged in servicing of cars and trucks, domestic and foreign trade, and other activities.
Also has overseas manufacturing facilities in the following countries: Angola, Azerbaijan, Afghanistan, Venezuela, Vietnam, India, Iran, Kazakhstan, Korea, Nicaragua, Pakistan, Panama, Philippines, Poland, Saudi Arabia, Sudan, Turkmenistan, Ukraine, Chile, Ethiopia.
Taking into account all shareholders’ objectives and interests is the basic premise of the Strategic Development Program.
Russia considers KAMAZ as its industry shaping enterprise and a major exporter of commercial vehicles, as it was formulated in “The RF Automobile Industry Development Strategy until 2020”; and a major shareholder in the company – Daimler – considers KAMAZ to be a strong regional player.
As a result of an impact from these factors, there are the following strategic priorities of the development of KAMAZ:
key market is Russia;
maintaining the dominant role in the CIS countries;
presence in the attractive markets of Euroasia, Africa and South America;
positioning itself in the medium price segment;
developing the integration with Daimler.
Nissan Manufacturing RUS
Country Russia
Year of entry 2004- entrance, 2009-plant
Industry/ business area Car manufacturing plant, subdivision of multinational Japanese company Nissan.
Entry mode FDI, greenfield
Motives Cost reduction, localization, high demand
Firm specific advantages used on the foreign market International experience, cheap resources and workforce
First mover or follower Follower
Type of state involvement in the process of internationalization Financial and tax support by state
Evaluation of the success of the internationalization In just a few years, Russia has become one of the priorities of the world markets for Nissan.The company's sales in Russia in 2011 amounted to 146,000 cars, 43,000 were produced at the plant in St. Petersburg.Wide dealer network Nissan is present in all major Russian cities, and the number of dealers is growing. To date, open and are available 132 saloon.
The test vehicle assembly plant was launched in early 2009. A June 2, 2009 near St. Petersburg the grand opening of the plant. At the St Petersburg plant will initially be released only two models - Teana and X-Trail. The design capacity - 50 thousand cars a year. Maximum number of staff - 750 people. Total investment in the project by the Japanese company made ​​about $ 200 million.
At this time (2012) at the factory near St. Petersburg launched production models Nissan Teana, Nissan X-Trail and Nissan Murano. In addition, in 2012, started test production of the new Nissan Almera AvtoVAZ plant in Togliatti, in late 2012 to begin mass production of the model. Production is established on the new line for car assembly conveyor platform B0, which already made ​​car Lada Largus.
PCMA RusCountry Russia
Year of entry 2010
Industry/ business area Plant "PCMA Rus", the joint venture PSA Peugeot Citroën (70%) and Mitsubishi Motors Corporation (30%), has been producing cars
Entry mode FDI, greenfield; joint venture
Motives Localization, costs reduction, cheap resources
Firm specific advantages used on the foreign market International experience, whole cycle of production, international quality standartsFirst mover or follower Follower
Type of state involvement in the process of internationalization Financial and tax support by state
Evaluation of the success of the internationalization To meet growing demand, the expectations of Russian clients and provide them with the best quality cars - quality guaranteed in each plant PSA and Mitsubishi all over the world - PSMA Rus gradually increasing production volumes and therefore strengthens the position presented by the three brands in Russia.
Plant "PSMA Rus", the joint venture PSA Peugeot Citroën (70%) and Mitsubishi Motors Corporation (30%), opened in Kaluga region in April 2010. PSMA Rus is one of the largest employers in the region and contributes significantly to the economy of the area. Plant equipment meets international industrial and environmental standards, and international experience of the team of the plant allows the company to successfully develop production.
Continuous build Peugeot 408 was successfully launched in 2012, which made it possible to present to the market a car designed with the Russian climate, road conditions and preferences of potential customers. Subsequently range of factory assembled models will join the cars of Mitsubishi and Citroën.
Sollers Group
Country Since 2010 – partnership with foreign car producers. No information about export.
Year of entry 2009
Industry/ business area Leading Russian automotive company that works in partnership with such leaders of the global automotive industry as Ford, SsangYong, Toyota, Mazda and Isuzu. 
Entry mode FDI, brownfield; joint ventures
Motives Offer of a full package of car services, from modifications adjusted to individual customer requirements to the most convenient forms of car ownership.
Firm specific advantages used on the foreign market Different types of entry modes, full customer service circle, innovations
First mover or follower Follower
Type of state involvement in the process of internationalization JSC. Governmental support: plant on the Far East (Russia); subsides provision.
Evaluation of the success of the internationalization In the years after the establishment of the company, it managed to take leading positions in Russian automotive market,  introduce more than fifteen new products, create together with the partners the capacities for producing about 550 thousand vehicles annually and become one of the most effective companies in the industry.
SOLLERS owns production sites that produce Russian UAZ and Korean SsangYong SUVs,  Japanese ISUZU trucks, as well as ZMZ petrol and diesel engines.
The SOLLERS strategy includes the full cycle of customer services: 1. Car selection: customer-tailored modifications. 2. Car manufacturing: realization of customer wishes.  3. Car sale: best service standards from the company’s chain. 4. After-sale services: full accompaniment of car operation.  5. Customer motivation: financial instruments of offers.
In 2011, Ford Sollers, a joint venture responsible for producing and selling a broad range of Ford vehicles in Russia, started its operations. In 2012, it was MAZDA SOLLERS, a joint venture that already launched production of its first CX5 model in Vladivostok. In 2013, it is also planned to start production of Toyota vehicles as part of a joint venture with Mitsui.
Volkswagen Financial Services RUS
Country Russia
Year of entry 2007
Industry/ business area Subdivision of Volkswagen Financial Services which provides financial services, including leasing, operating leasing, credit and insurance.
Entry mode Wholly owned
Motives Costs reduction, meet region peculiarities and demand
Firm specific advantages used on the foreign market International experience, innovations
First mover or follower Follower
Type of state involvement in the process of internationalization Financial and tax support by state
Evaluation of the success of the internationalization The company Volkswagen Financial Services Rus was one of the finalists of the international competition «Russian and the CIS Call Center Awards 2009".
Volkswagen Group Finanz is one of three leading car leasing companies in Russia.
Volkswagen Financial Services RUS (LLC "Volkswagen Financial Services RUS") operating in the Russian market since 2007 and is a division of Volkswagen Financial Services AG - one of the largest international companies specializing in financial services for the automotive market. Volkswagen Financial Services for over 50 years providing financial services, including leasing, operating leasing, credit and insurance, in more than 35 countries. During this time, had accumulated the expertise to create a progressive technology and our own know-how, which are already being used in Russia.Volkswagen Financial Services RUS works with brands that are part of the concern Volkswagen AG: Volkswagen, Audi and SKODA.
SummaryAs it can be seen from the tables above, many of these companies get financial and tax support from the Russian government, which is rather interested in foreign investments of this kind in this sector of economy. The foreign market players which come to Russia provide local citizens with thousands of new working places and make a significant impact into the GDP of the country. The main directions of the governmental policy in the issues of automotive companies support are the following:
Customs tariffs and taxes correction;
Subsides provision for those individuals who are going to take a loan for a car purchase;
Stimulation of the investments and public guarantees provision;
Discount for cars delivery to the Far Eastern Federal district (in partnership with Russian Railways).
The Russian companies from this sector obviously get even more support which is expressed in governmental programs of financial help (for example, governmental subsidy loans program for AvtoVAZ or non-repayable loans), collaboration with the foreign partners (for instance, Renault), stimulation of demand through public purchases and old cars utilization mechanism.
All in all, these measures make the Russian automotive industry attractive for the foreign investors from the one side and help domestic companies stay competitive and expand abroad – from the other.
There are 2 more foreign companies which are not related to the automobile construction but in terms of Russian policy issues and market penetration mode they are quite similar to the foreign cars producers. These companies are Samsung and Indesit. The first one came to the Russian market in 1974 and has its production facilities in Lipetsk. The business of the company are refrigerators and washing machines. As for Samsung, it established the first plant in Russia in 2007 and exports the production from there also to Belarus, Ukraine and Kazakhstan. The business of Samsung – TVs, monitors, mobile phones, players etc.Group 3:
Finally, the last big group of the companies consists of those which produce heavy machinery such as airplanes, railways transport, shipment, agricultural technics and engineering machinery for fuel or chemical plants (compressors, turbines and other equipment). They are mostly local and some of them are state-owned. The majority of these companies was established in the Soviet times and was converted into holdings in the early 2000s. Exporting activities of these companies are quite intensive. The results of the analysis are listed in the table below.
AltaivagonCountry Kazakhstan, Uzbekistan, Estonia, Mongolia, China
Year of entry 1970
Industry/ business area Rail wagons, cisterns and platforms construction; steel-casting works
Entry mode Export
Motives Political reasons (relationships with the countries established in the Soviet times); demand in the countries; favorable logistics environment; high production capabilities of the enterprise
Firm specific advantages used on the foreign market High quality of production; better access to resources (steel) in comparison to the countries of export; first mover advantage
First mover or follower First mover
Type of state involvement in the process of internationalization State was involved in the process, because at that moment the enterprise was state-owned and its internationalization policy was defined by the Soviet government.
Evaluation of the success of the internationalization The internationalization was successful and it remains successful now due to the many-years old relationships, wide network of the business contacts and high demand for the production in the buying countries.
JSC “Altaivagon” is one of the biggest Russian manufacturers of railway cargo vehicles (wagons, cisterns and transporting platforms). The main production of the company contains around 20 models of railway vehicles of different types and construction and able to transport any cargo. “Altaivagon” develops and produces these models, provides services of the vehicles and also operates in steel production.
The company was founded in 1941 and used to be fully state-owned. It went internationally in the 1970s establishing close contacts on the Chinese market. PRC was the first international partner of “Altaivagon” and further the company developed its exporting activities to Estonia, Mongolia, Kazakhstan and Uzbekistan. The choice of the countries was stipulated by the political relationships with the Soviet state, the existing demand on those markets together with a great access of “Altaivagon” to the main raw material – steel. Moreover, it was easy and relatively cheap to deliver the production to those countries due to the geographical location of the plants. “Altaivagon” has three plants in Russia (Novoaltaysk, Rubtsovsk and Kemerovo) where all the production is done.
In 2004 the enterprise was joined to The SDS (Sibirsky Delovoy Soyuz) Holding which is a private company. Today the company realizes the major part of its production on the Russian territory and also exports to the countries mentioned above. It possesses 10% of the railway vehicles construction market share in the CIS region and is the only supplier of the covered cargo wagons to all the railways network of CIS. Moreover, JSC “Altaivagon” is the only Russian producer of the car carriers.
According to the weekly magazine “Expert”, JSC “Altaivagon” takes the second place in the ranking of the most dynamic medium enterprises in Russia (2011); its sales amount in 2011 was 126 billion RUB.
Nowadays JSC “Altaivagon” is supported by state on the local authorities’ level. It gets mostly financial support (backing of the credit rate for account of the Altay district’s budget).

Compressor Plant BoretsCountry China, Kazakhstan, Ukraine
Year of entry 1956
Industry/ business area Compressor equipment, oil & gas equipment
Entry mode Export and a representative office in Kazakhstan and Uzbekistan
Motives Political reasons, existing demand, production capacities
Firm specific advantages used on the foreign market Products’ quality
First mover or follower No information displayed
Type of state involvement in the process of internationalization State was involved in the process, because at that moment the enterprise was state-owned and its internationalization policy was defined by the Soviet government.
Evaluation of the success of the internationalization It is successful, the company keeps advancing in the international direction and has recently opened 2 representative offices abroad.
Compressor Plant Borets is the oldest compressor-construction manufacturer in Russia, located in Moscow and was established in 1897 by a German merchant. It designs, manufactures and provides services for the compressor equipment. In 2010 it was reorganized to the JSC.
The company today is one of the Russian leaders in the compressor and gas-distribution equipment and has a sound reputation of a developer and a producer of equipment for oil, gas, chemical, metallurgy and other industries.
The plant is owned by a private individual, its organizational form is JSC and it has been privatized in the 1990s, what is quite typical for this kind of enterprises.
As for the internationalization activities, the scope is not that big, the company is mostly focused on the Russian market. However, it has recently opened 2 representative offices in Kazakhstan and Uzbekistan, those countries with which it has active exporting relationships.
In 2011 sales volume of the company was 17 136 million RUB.
Electroshield Group
Country CIS countries
Year of entry 1970s
Industry/ business area Electrical and engineering construction
Entry mode Export, representative offices
Motives Political reasons, existing demand, production capacities, favorable logistics conditions
Firm specific advantages used on the foreign market Great experience (50 years), constant innovations (75% of all production), the only regional enterprise which is able to maintain production volume together with profit
First mover or follower First mover
Type of state involvement in the process of internationalization State was involved in the process, because at that moment the enterprise was state-owned and its internationalization policy was defined by the Soviet government.
Evaluation of the success of the internationalization The internationalization was successful due to the firm’s advantages on the foreign markets
The “Electroshield” company is a 70 years old Russian developer and manufacturer of electrical products with a great history and a brilliant reputation. During last 50 years the company takes a leading place on the Russian electrical market and during 40 years – on the construction industry market. The company is not only the one in Russia with such a sound experience of electro-production but also pays much attention to constant innovations. The new products share in total amount of production reaches 75%. Company’s sales are 21 634,20 million RUB in 2011.
The “Electroshield” company manufactures and realizes electrical products 0,4-220 kV as well as a great variety of construction materials including modular and industrial buildings.
The company was founded in 1943 as a service and maintenance basement for the Volzhskaya hydro plant building and now it has been developed into a great complex of enterprises. It includes several manufacturing areas, planning institutes, engineering and commercial facilities, assembly departments and 19 representative offices in Russia and CIS countries.
“Electroshield” is now owned by Russian state (25%, Rosimuschestvo) together with the company’s top-management (25%) and a French company “Schneider Electric” (50%). At the moment of foundation as well as at the period of international expansion it was completely state-owned and the political connections of the Soviet government dictated its international policy.
HMS Group
Country Belarus, Ukraine, Germany
Year of entry 1995
Industry/ business area Pumps, compressor equipment production for oil & gas, power generation, utilities and water supply
Entry mode FDI (brownfield, acquisition of production plants in Belarus, Ukraine and Germany). Joint venture: the HMS group includes 10 JSCs in Russia, Belarus, Ukraine and Germany.
Motives Historical reasons (the company was established as a supplier of compressor equipment from CIS countries); company’s strategy (to become a supplier of the equipment on the international level)
Firm specific advantages used on the foreign market Production quality, constant innovations, established long-term relationships abroad
First mover or follower Follower
Type of state involvement in the process of internationalization The state did not participate in the internationalization process; the company was established as a private one
Evaluation of the success of the internationalization The internationalization was successful; the company develops dynamically and keeps expanding its international activities.

HMS Group is a dynamically growing diverse corporation that combines leading manufacturing (рumps, compressors, oil and gas equipment), engineering and construction companies. It operates on the markets of oil & gas, nuclear and thermal power generation, water supply & utilities, metallurgy etc. EPC projects for oil & gas and water industry is one of the strategic directions of the HMS Group. The company claims its target as to become a globally operated machine building and engineering company, to become client-oriented pumps, compressors and processing equipment supplier and integrated solutions provider for oil & gas, power, water and environment.
The company was found in 1993 as a supplier of the compressor equipment to Russia from the CIS countries where the special types of pumps for the Russian market could be found. Starting from the 1995 the scope of the group’s activities became international and the company turned out into one of the leaders of the Russian pumps and compressors market. The HMS group operates in Russia, Ukraine, Belarus and Germany and has production plants in all these countries. The group includes 10 JSCs – large specialized producers of pump, compressor and block-modular oil-field equipment and the variety of design, engineering, construction and service companies: Livgidromash, Neftemash and Bavlensky Plant «Elektrodvigatel», Nasosenergomash (Sumy, Ukraine), Nizhnevartovskremservice and Livnynasos, VNIIAEN (Sumy, Ukraine), Tomskgazstroy, Sibkomplektmontazhnaladka, Dimitrovgradkhimmash, Plant Promburvod (Minsk, Belarus), NPO Gidromash (Sumy, Ukraine), Sibnefteavtomatika and Rostovsky Vodokanalproekt, Giprotyumenneftegaz, Hydromash, Sibneftemash, Bobruysk Machine Building Plant, Kazancompressormash and Apollo Goessnitz GmbH, German pump manufacturer. The company’s profit in 2011 was 23 563 million RUB.
The company is a private one and state is not included into the ownership or management processes. However, The HMS Group gets some financial support from the Russian government: for example, in 2011 Sberbank opened a special credit line for the company for 3 years so that it was able to refinance its short-term debts and to reduce costs of the borrowed assets.

Irkut Corporation
Country 37 countries: India, Algeria, Cuba, China, Malaysia, Middle East, Africa, CIS countries, Europe
Year of entry 1937 – first export to China
Industry/ business area Aircraft manufacturing
Entry mode Export
Motives Political reasons: during the conflict period between China and Japan the USSR made an agreement with China about fighters “СБ” supply; existing demand
Firm specific advantages used on the foreign market Production quality, political relationships
First mover or follower First mover
Type of state involvement in the process of internationalization The State participated directly in the internationalization process
Evaluation of the success of the internationalization The internationalization was and still is successful due to the existing demand in the countries
The Irkut Corporation is the world-recognized leader of the Russian aerospace industry. It is arranged as the vertically integrated holding company with diversified products portfolio, able to conceive, design, build, deploy, and support top-of-the-line aircraft. The IRKUT Corporation has unified a number of prominent design and manufacturing companies — Irkutsk Aviation Plant, Beriev Aircraft Company, Yakovlev Design Bureau, BETA AIR Company and some others.
The Irkut Corporation’s main products are combat aircraft of the Su-30 family. The Corporation is a prime contractor in manufacturing the Su-30MKI multi-role fighters for the Indian Air Force. Under a product diversification program, the Corporation is also developing and manufacturing Yak-130 combat training aircraft, unmanned aerial vehicles and components for Airbus passenger airliners. In the recent years Irkut has launched the program of developing the new passenger airliner  MC-21.
The Ircut Corporation exports its production to 37 countries all over the globe: to Africa, Middle East, Europe, China, ASEAN region, CIS countries. Its first foreign sales were in 1937 when the Soviet government took a decision to supply fighters “СБ” to China which was involved into the war conflict with Japan. Since that the corporation has significantly expanded its activities and sales abroad.
The Irkut Corporation is a part of a JSC “United Aircraft Corporation” which is fully state-owned. The United Corporation possesses over 92% of Irkut’s shares and thereby The Irkut Corporation is 92% state-owned. The Corporation constantly gets state orders from abroad for the military production.
Kamskiy KabelCountry Kazakhstan, Belarus, Ukraine
Year of entry 1956
Industry/ business area Cabling and wiring products
Entry mode Export
Motives CIS countries – geographical location and political relationships. Europe and other countries abroad – almost no operations there
Firm specific advantages used on the foreign market Production quality
First mover or follower First mover
Type of state involvement in the process of internationalization The company was state-owned at the period of internationalization, so it has a direct influence
Evaluation of the success of the internationalization CIS – yes, further abroad – no.
Kamskiy Kabel Ltd. is the largest Russian manufacturer of cables, wires and conductors operating also on the CIS countries market. The plant is situated in Perm; the company also has a representative office in Kazakhstan. The company is included into the Forbes list of 200 biggest non-public companies in Russia in 2011.
Kamskiy Kabel Ltd.’s prior market is internal one because the demand of Russian enterprises for cable products is growing even faster than Kamskiy Kabel’s facilities. Over 85% of all production is sold in Russia, 12 – 13% - in the CIS countries and only 2% are sold abroad. The low export share is explained by the following reasons:
Incompatibility of local Russian standards and international requirements;
Higher price for the foreign customers because of transportation costs (3 – 10% of the cost of goods);
Production capacities workload by internal orders.
Kirovskiy ZavodCountry Over 20 countries (Germany, Great Britain, CIS and others)
Year of entry First entry data is not displayed; series of joint ventures and acquisitions in 2011 – 2013.
Industry/ business area Various portfolios. See below.
Entry mode Export; FDI (brownfield): acquisition of German machinery plant Monforts Werkzeugmaschinen GmbH & Co, joint venture with tractor producer Same Deutz-Fahr and European holding Euro Group S.p.A.
Motives To develop technological experience of Kirovskiy Zavod in the innovative production area and to improve the production facilities base of the enterprise; integration to the global economy.
Firm specific advantages used on the foreign market Experience, production quality, market knowledge acquired through M&A
First mover or follower Follower
Type of state involvement in the process of internationalization Without any state involvement
Evaluation of the success of the internationalization It is too early to evaluate now.
Kirovskiy Zavod is a large group of companies, one of the biggest in the North-West region of Russia; in 2009 was included into the list of the system-formative enterprises of the Russian Federation. Its various business portfolio includes the following productions: equipment for agriculture, fuel and energy sector, road construction, industrial and civil engineering, oil and gas, nuclear energy, defense, forestry industry, utilities, railroad transport and shipbuilding. The production of Kirovskiy Zavod is exported to over 20 countries in the world.
It is difficult to say when exactly the company started export of its production abroad since there was no actual information displayed; however, in the recent years Kirovskiy Zavod leaded a series of M&A activities and thus penetrated the German tractor and metal construction market. The aim of these deals was to integrate to the global economy and to get new experience of the foreign partners.
The company constantly collaborates with the Russian state through the state orders provision (Ministry of Defense, Rosimuschestvo, Rosatom). Moreover, the company operates in the industrial machinery construction sector and thus gets a special governmental support.
The company is owned partly by private individuals (18%), partly by the Swiss banking group UBS (18%) and the majority of its stocks belong to the National Depository Company.
Machinery and Industrial Group N. V.Country Sales to 40 countries through dealer network of about 300 companies. Facilities in Germany, Denmark; distribution center in Ukraine, subsidiary in Malaysia.
Year of entry 2008
Industry/ business area Facilities and spare parts for light and heavy engineering and off-road machinery. Industrial and agricultural machine building, manufacturing of spare parts and OEM components, railway and special machinery.
Entry mode Export and FDI (brownfield); acquisitions and joint ventures with foreign partners.
Motives To get access to a wider customer base and to get a new technology experience
Firm specific advantages used on the foreign market Market knowledge, widespread dealers network
First mover or follower Follower
Type of state involvement in the process of internationalization No involvement
Evaluation of the success of the internationalization The internationalization was successful due to the wide network of partnerships and high production quality
Machinery & Industrial Group N.V. is a leading producer of facilities and spare parts for light and heavy engineering and off-road machinery. M&IG N.V. has a leading presence not only in key sectors of Russian and CIS countries economy but also worldwide. Its production is used in the oil & gas, fuel-and-energy, infrastructure, agriculture, construction and road-building sectors as well as in mining, metallurgical, transport and defense industries. 
From the headquarters in Cheboksary (Russia) the company operates 17 production facilities, several design bureaus located in 8 regions of Russia, Denmark and Germany. The production portfolio includes: industrial, railway and agricultural machine building, manufacturing of spare parts and OEM components and special machinery. Diversified production portfolio of the Concern guarantees broad customer base which is being promoted by five special trading-service companies in more than 40 countries worldwide through extensive dealer network of about 300 companies.
The company started active internationalization processes in 2008 with acquiring 74% of shares of a German producer of autocomponents Farinia Group. After this deal the holding got an access to the flagship European technologies and such global producers as Buhler, BHS Corrugated, Caterpillar, CNH, Copeland, Cummins, Danfoss Bauer and General Electric, who were the existing customers of the German company.
The company is private; as for the state involvement, in different sectors of its operations it varies; for example, in the agricultural machinery construction the government does not support exporting activities and in general the average export volume in agricultural sector dropped by 27,1% in 2012. In the industrial machinery construction industry the government takes a set of supporting measures which are listed in the conclusive part of this report.

OMZ Group
Country Czech Republic, CIS countries
Year of entry 2004
Industry/ business area Equipment for the nuclear power industry; Engineering and equipment for the oil and gas industry; Production of special steels; Mining equipment
Entry mode Export to CIS countries; FDI (acquisition of Skoda JS. group of companies)
Motives Reliable partner with a sound experience and a big customers base
Firm specific advantages used on the foreign market Price, quality, and production schedule and delivery of equipment
First mover or follower First mover
Type of state involvement in the process of internationalization No direct involvement
Evaluation of the success of the internationalization The internationalization was successful
OMZ Group is one of Russia's largest heavy engineering companies. The group’s activities are diversified and include the following business areas: equipment for the nuclear power industry, engineering and equipment for the oil and gas industry, production of special steels and mining equipment.
The company is private; it is owned by JSC Forpost Management (46,31%), Investresource Ltd. (18,55%), OMZ B. V. (17,33%) and other private shareholders. As other companies operating in this industry, it gets support from the Russian government (financial – tax, subsides, legislative etc.). It also cooperates with a strong financial partner – Gazprombank, whose top-managers are represented in the company’s board of directors.
The company has been trading with CIS countries since the Soviet period of its history, which is very typical for the companies from this industry; in 2004 it went global and acquired a group of Czech steeling companies Skoda JS. It brought the company to a new level of operations together with an access to the new technologies.

Power Machines
Country Exports to 57 countries with significant market in Asia. Offices and branches in Argentina
Bulgaria, Vietnam, Greece, Egypt,
India, China, Iraq, Serbia, Syria, Tajikistan
Turkey, Chile
Year of entry 2001
Industry/ business area Energy systems machine-building company; produces steam turbines, including turbines for nuclear plants
Entry mode Export, representative offices; acquisition of a plant in Croatia, joint venture with Siemens
Motives Go global; international expansion, customers, experience
Firm specific advantages used on the foreign market High production quality and a great dealers network
First mover or follower Follower
Type of state involvement in the process of internationalization No direct participation of the state
Evaluation of the success of the internationalization It was successful: 57 countries, 4th place in the world (see below).
Power Machines was established in 2000 and unified 6 large JSCs in one holding of energy-systems machinery building producers. It provides operating facilities in 57 countries and takes the 4th place in the world in this respect.
Power Machines company is not only a large exporter of the energy systems facilities (started foreign operations in 2001 in order to integrate the global economy and expand its markets) but also possesses 100% shares of a Croatian plant “Duro Dakovic” (one of the largest European boiler equipment manufacturer) and has a joint venture with the Siemens company operating on the Russian market.
The company is private and is controlled by a private capital. The major part of its shares belongs to the Interros holding (owner – Vladimir Potanin).

SukhoiCountry India, Algeria, China, Indonesia , Vietnam etc.
Year of entry 1964
Industry/ business area Major Russian aircraft manufacturer, famous for its fighters.
Entry mode Export
Motives Existing demand, political connections
Firm specific advantages used on the foreign market High quality and unique experience
First mover or follower First mover
Type of state involvement in the process of internationalization State participated directly (state-ownership)
Evaluation of the success of the internationalization Internationalization was successful through the years of global operations
Sukhoi is Russia’s major aircraft holding company, employing more than 26,000 people. 100% of stock of the Sukhoi Aviation Holding Company (JSC) belongs to the United Aircraft Corporation (JSC, state company). The Company supports a complete cycle of work in aircraft engineering: from frontend engineering to comprehensive aftersales support. The holding's products, such as Su- marque combat aircraft, are state-of-the-art weapons systems in the global market, which form the backbone of the frontline aviation of Russia and tactical air forces of many other countries. The Company is Russia's major manufacturer of export aircraft, placed 3rd in the world in terms of the numbers of modern fighters produced. The Company is currently implementing promising programs in the field of military and civil aircraft engineering.
The company has a great history, also in terms of internationalization: it started selling its fighters abroad in the 1960s and nowadays the production of the company is taken on for the military forces in more than 30 countries. The company has always been state-owned, so its operations are under direct influence of the government.

TransMash Holding
Country CIS and Eastern Europe
Year of entry 2002
Industry/ business area Rail transport (wagons and components), rail services.
Entry mode Export; sales representatives; joint venture with a French partner Alstom Transport
Motives Existing demand; strategic partnerships for technological improvement, access to the European quality and experience
Firm specific advantages used on the foreign market Quality and price
First mover or follower First mover
Type of state involvement in the process of internationalization State company is one of the primary owners of the holding and thus it was directly involved into the processes of internationalization.
Evaluation of the success of the internationalization Internationalization was successful.
CJSC Transmashholding is the biggest Russian company in the transport engineering industry, the world’s leader in railway engineering in actual volume of production. Transmashholding is the largest supplier of rolling stock for the world's biggest transportation company – JSC Russian Railways. Products of the enterprises of the Company are operated in dozens of countries in all climatic zones of the world.
The enterprise was established in April 15, 2002. The only nominee shareholder is Breakers Investments BV (Netherlands). Among the owners are OJSC Russian Railways and Alstom Transport, French engineering group Alstom Transport. The partnership with the French company provides the holding with an access to the most modern technologies and a sound experience and European market knowledge.
The company is very active in exporting its production abroad to the CIS countries (relationships which exist since the Soviet times) and to the Eastern Europe. As it has been mentioned, one of the primary owners of the holding is a state monopoly, which provides it with up to 70% of state orders and production contracts. Russian metropolitan is the second biggest orders provider for the holding (7 -8 billion RUB profit each year).
TVEL
Country 15 countries (40% - Ukraine, 60% - CIS, Europe, India)
Year of entry 1994
Industry/ business area Production of fuel assemblies and components for them, as well as services for development, licensing, and scientific and technical support of fuel operation.
Entry mode Export and strategic partnerships with foreign fuel producers
Motives Expansion of the cooperative collaboration in the global energy industry
Firm specific advantages used on the foreign market Outstanding quality of the products
First mover or follower First mover
Type of state involvement in the process of internationalization The state participated directly since the company is fully state-owned
Evaluation of the success of the internationalization It was successful (17% of the world market)
TVEL Fuel Company is a division of Rosatom State Corporation.  Basic activities of the TVEL Fuel Company are focused on development, fabrication and sales (including export sales) of nuclear fuel and associated nonnuclear products. TVEL includes large Russian enterprises that specialize in fabrication, supply and scientific and engineering support of nuclear fuel operation at NPPs of Russia and both near and far abroad countries. Among the affiliated companies of TVEL there are enterprises producing gas centrifuges, separating and sublimation and fuel fabrication plants.
TVEL completely meets the needs in nuclear fuel of Russia atomic energy sector. All Russian NPPs, research reactors and navy transport plants use fuel of TVEL.
Nowadays nuclear fuel of TVEL, JCS is applied at NPPs of Germany, Switzerland, Sweden and the Netherlands. Fuel Company enterprises manufacture fuel for nuclear power plants of China, India and Iran. In total, TVEL, JSC provides for the needs of 76 power reactors in Russia, and in 15 European and Asian countries (17% of the world market), as well as for 30 research reactors throughout the world. The company is constantly expanding its international markets negotiating contracts for fuel supply to the Asian region. Moreover, it is included into several international strategic partnership projects since 1994 in order to support the policy of cooperative collaboration in the global energy industry.
SummaryThe Russian companies operating in the sector of heavy-machinery construction for agriculture, railways, industrial needs and others have the following common features (in terms of historical background, state ownership and involvement into the operations, internationalization processes):
Almost all of them have been founded on the basis of plants and manufactures existed in the Soviet period. At that time all these enterprises were obviously fully state-owned and got a sound governmental support; their policy was dictated by the State as well.
Almost all of them nowadays actively trade and cooperate with the CIS countries, which is also explained by their Soviet past. Some of the companies examined export their production to Asian and Latin American countries due to the political connections established years ago.
The majority of these companies operate in the strategically important fields for the Russian state. Consequently, they get a support from the Russian government. The purpose of these measures is to prevent import production raise on the Russian market:
Subsidies of the credit percentage rates (light industry, automobile construction, transport machinery construction, agricultural machinery construction, oil and gas equipment engineering and construction, aircraft manufactury);
Budgetary financing for the promising R&D projects;
Local market protection from the import production pressure (special taxation policy and high customs tariffs for the foreign producers);
Provision of state warrantee for credits for system-formative and strategically important enterprises
Many of the companies are now privately controlled holdings, unifying many production facilities.
The most widespread entry mode in this companies’ category – export; joint ventures exist but are much less represented.

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