Internationalization of transnational
corporations of automobile industry in
Russia and the factors of success
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Mikhail Chistyakov
1
Department of management
2
4
National Research University – The Higher School of
Economics
Research motivation
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• Rapid growth of Russian car market: up to 30 % a year (Datamonitor)
• Foreign car makers actively enter the market and show great results:
– For 10 years (1999 up to 2008) car sales of all foreign companies has
grown by more than 42 times (from 48 ths. up to 2 055 ths.) (Autoreview)
– For 10 years foreign companies increased their share sufficiently: from
about 6% in 1999 up to 65 % in 2008 (Datamonitor, Autoreview)
– In 2008 the Russian market became the 2nd largest european market after
the German one
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2
4
At the same time some companies seems to be more successful than other
ones:
• 17% of all foreign brands presented in Russia retained 70 % share in
2008 (10 brands out of total 58; 1 436 ths. of total 2 055 ths.) (Autoreview)
• 5 of 5 the best performant companies (based on market share) have production
line in Russia
Research motivation, some figures
sales of foreign carmakers in Russia
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0100
1011
20
54
45
1
2500000
100
80
60
99
20 40
00
20
0
-20
-40
-60
16
33
90
0
2000000
10
03
80
0
1500000
60
00
35
00
00
19
0
1
0
73 48 45 80 0 1 00 300
0
80 00 00
00
0
0
0 00
1000000
500000
Change, %
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
0
Cars
Years
Top 10 of foreign car manufacturers in Russia
250000
200000
150000
50000
oo
on
da
H
pe
l
O
ae
w
D
C
he
vr
ol
et
To
yo
ta
H
yu
nd
ai
Fo
rd
N
is
sa
n
M
its
ub
is
hi
R
en
au
lt
0
2
4
Sales, 2008
100000
1
Objective. Research questions
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• Objective: to track entry modes used by foreign carmanufacturers and to reveal whether entry mode is one of
success factors
1
• Questions:
• Q1: what entry modes do multinational entreprises
(MNEs) of automobile industry use on the Russian
market?
4
• Q2: What are the key factors of success of MNEs? and
– Is entry mode one of them?
2
Literature
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• 3 main conceptual frameworks in analyzing
entry modes:
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– Transaction cost theory (e.g. Hennart, 1991;
Hennart and Larimo, 1998)
– Resourse-based view (e.g. Ingham and
Thompson, 1995; Chen and Chen, 2003)
– Institutional approach (e.g. Brouthers, 2002; B.
Elangoa, Rakesh B. Sambharya, 2004; Meyer
and Nguyen, 2005)
4
Literature
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• Special attention in literature on entry mode is paid for
allocation of determinants of entry mode (Dunning, 1988;
H. Chen, M. Hu, 2000; Ilian P. Somlev, Yasuo Hoshino,
2005)
• Countries that are most considered in the researches:
China, USA, Korea, Japan.
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• Although:
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4
– a few researches considers Russia. No researches found that
consider Russian automobile industry
– Little consideration is paid to the question of place and role of
entry mode in a success of a company
Literature
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• According to Dunning (Dunning, 1988) entry mode of a
TNE depends on combination of internal and external
conditions (OLI: ownership, locational, internalization
advantages). Dunning distinguish 3 entry modes:
– Export
– Licensing
– FDI
1
– Joint-venture/ strategic alliance
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4
• Most of researces in addition to that count 4th
entry mode:
Methodology
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• Case-study method is used
• Почему?
• 4 companies that have shown the best results on the
Russian market during 10 years (1999-2008) were chosen:
–
–
–
–
Toyota
Ford
Hyundai
Renault
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2
4
• Factors of success were at first found in each case and then
– for all 4 companies in general
Methodology
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• 2 step methodology was applied:
– 1st step: extended analysis of documentary sources was
carried out due to track entry modes used by the
companies and to compose preliminary list of success
factors for each company
– 2nd step: Interview of dealers and experts specializing in
automobile industry was realized due to check results
found in documentary sources and to compose final list
of success factors for each company and for all
considered companies
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4
Results. Toyota
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•
Key dates:
1992 – start of exporting to Russia
2002 – moving to centralized distribution
2003 – decision on making FDI, start of construction of factory
2005 – start of production in Russia
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2
•
Production in Russia (2008): Toyota Corolla (34%), Toyota Camry (15%)
•
Factors of success:
–
–
–
–
–
Exceptional trust to brand (quality and reliability)
Presence of an attractive model, model in demand
Manufacturing in Russia
Aggressive marketing approach
Centralized distribution
4
Results. Ford
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• Key dates:
1992 – start of exporting to Russia
1998 – decision on making FDI
2002 – start of production in Russia
1
2
• Production in Russia (2008): Ford Focus – 52 % of total Ford sales
• Factors of success
– Presence of an attractive model, model in demand
– Manufacturing in Russia
– Aggressive marketing approach
– Aggressive pricing strategy
4
Results. Renault
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• Key dates:
1992 – start of exporting to Russia
1998 – decision on making FDI
1999 – start of test production in Russia (1000-2000 cars a year)
2003 – start of full-scale production in Russia
2008 – decision on creating strategic alliance with AvtoVaz
1
2
4
• Production in Russia (2008): Renault Logan - 70% of total Renault
sales
• Factors of success
– Presence of an attractive model, model in demand
– Manufacturing in Russia
– The developed dealer network
Results. Hyundai
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• Key dates:
– 1992 – start of exporting to Russia
– 2000 – decision on licensing 2 models, expansion of dealer
network
– 2008 – decision on making FDI, start of factory construction
1
• Factors of success:
– Manufacturing in Russia (under licence mode)
– Low prices
– Extension of dealer network (2002)
2
4
• Production in Russia under license (2008): Hyundai
Accent - 36% of total sales, other models -15%
Results. Factors of success
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•
5 key factors are the following:
1. Presence of an attractive model, model in
demand (1 or 2 focus models)
•
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2
For all of 4 considered companies these models
comprised 50% to 75% of total sales
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2. Active support to this model (marketing,
pricing, crediting)
3. Manufacturing in Russia
4. The developed dealer network
5. Trust to brand (quality and reliability)
Results
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• Reasons why production in Russia is a key
factor of success:
– Close to consumers; that is fast reaction on
growing demand
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2
4
– Positive image of a company as national
carmaker
– Fiscal benefits from the Russian Government
– Cheaper production
Limitations and Future research
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• Preliminary framework found in this study
needs to be tested.
• Results found in documentary sources and
by focus group should be tested based on
inquiry of companies’ representatives
• Consequently: quantitative research that
includes all major foreign carmakers should
be carried out
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