Competition and Co-operation between Finnish and Russian Enterprises Cases of Food and ICT industries. Professor Juha Väätänen

Transcription

1 Competition and Co-operation between Finnish and Russian Enterprises Cases of Food and ICT industries Professor Juha Väätänen Russia in Flux Research Programme Seminar

2 Competition and Co-operation between Finnish and Russian Enterprises -Project Organization: Lappeenranta University of Technology Centre Department of Industrial Engineering and Management Co-operation: Helsinki School of Economics: Center for Markets in Transition Funding: Tekes/Densy Finnish Food and Drink Industries' Federation Etlatieto Oy International Finance Corporation (IFC) Municipality of Lappeenranta

3 Competition and Co-operation between Finnish and Russian Enterprises -Project RESEARCH TOPICS 1) Competitiveness of new Russian companies - business models and structure of the competitiveness factors in three sectors under surveillance (ICT, Logistics, Food processing) 2) Future operation models - successful Russian companies, threats or opportunities for Finnish companies? 3) Collaboration possibilities for enterprises in South-East Finland and North-West Russia - co-operation and subcontracting

4 Case of Retail and Food Industry RETAIL AND FOOD INDUSTRY RESEARCH Co-operation with Finnish Food and Drink Industries' Federation, TEKES and 5 food producers (Atria, Valio, Fazer, Leaf, Raisio) OBJECTIVE IS TO Evaluate the business opportunities and competitive situation in Russian food processing industry and retailing Assess the Russian food processing industry and retail sector from foreign investor s point of view Help foreign companies to implement their strategies in Russia

5 Case of Retail and Food Industry DATA COLLECTION Multiple interviews in Russia and Finland (altogether 43) Food producers Retailers Investment banks Wholesalers, distributors Food organizations Experts and directors Goskomstat Institutes such as UNCTAD, WIIW and World Bank

6 Case of Retail Sector Fast growing market (Food retail trade worth of 94 billion in 2005) The turnover of the companies and the number of stores is increasing Company Format Turnover 2005 USD Million Turnover 2004 USD Million Change % YoY Tander Discounter % Metro Cash & Carry % Pyaterochka Discounter % TOP % Source: Retailers, Rosstat, RC Competition increasing -> Consolidation Regional markets becoming more attractive Consumer and buying behavior is changing

7 Case of Food Industry Low agricultural productivity -> Shortage of raw materials Production facilities outdated Local companies have been able to grow strongly after 1998 crisis Russia is a net food importer, 20% of food is imported WTO membership will improve the position of trade partners Picture: Petmol

8 Case of Retail and Food Industry PUBLICATIONS Kaipio, Hannu. Leppänen, Simo Distribution systems of the food sector in Russia: the perspective of Finnish food industry. Centre, Publication 19. Louhivuori, Jani Russia s food retail sector from the point of view of Finnish food producers. Centre, Publication 26. Ylä-Kojola, Anna-Mari Assessment of Russian food processing industry Finnish perspective. Northern Dimension Research Centre, Publication 29. Publications available at

9 Case of ICT Industry ICT market size 19.6 billion USD in 2004 Various types of ICT companies The largest ICT companies are holdings Largest ICT companies (sales, USD mil 2004) HCC 612,7 IBS 595,2 R-Style 441,0 LANIT 395,2 Structure of Sales of the Largest Russian ICT Companies 2004 Equipment manufacturing 8,7 % 19,5 % 7,1 % SW development IT services 4,4 % Equipment distribution 32,7 % Telecom. services 27,7 % Equipment supply in integration projects Source: NORDI Publication 20

10 Case of ICT Industry Government institutions large part of ICT market Companies open for internationalization and foreign partnership IT centers in Moscow, St. Petersburg & Novosibirsk Regional ICT market development Internal outsourcing - from Moscow & St. Petersburg to the regions Demand for ICT products and services in 2004 Machinery & metall processing 5 % Transport 5 % Trade 4 % Metallurgy 4 % Energy 8 % Oil & gas 12 % Chemical & petrochemical 3 % Timber, woodworking, pulp & paper 1 % Financial institutions 14 % State institution s 25 % Telecom 18 % Source: NORDI Publication 20

11 Case of ICT Industry THE MAIN QUESTION Competition & Cooperation between Finnish & Russian ICT Companies RESEARCH FOCUS Russian ICT market internationalization Internationalization process of Russian ICT companies Monitoring of the situation in the Russian ICT market (market segmentation, ICT companies, development of market segments) Knowledge & technology transfer between Finnish & Russian ICT companies ICT outsourcing & offshore software development Russian IT Software export $994,00* $764,00* $546,00 $352,00 Year 2002 Year 2003 Year 2004 Year 2005 Source: NORDI Publication 20

12 Case of ICT Industry -Partners International Finance Corporation (IFC) is the private sector arm of the World Bank Group. Its mission is to promote sustainable private sector investment in developing countries, helping to reduce poverty and improve people's lives. Case company A Outsourcing company A leading Russian software development company, which caters to the international marketplace from offices in Russia, US & Scandinavia. It offers a wide spectrum of software related services, delivering packages which include required consulting, software development and maintenance. Case company B Software Developer One of the world leaders in Voice over IP software development winning numerous industry awards over the years. Founded in the US with development expertise, support and maintenance in Russia.

13 Case of ICT Industry Main Findings GENERAL Russia becoming major global ICT market player Strong economic development supporting ICT market Traditionally strong education system OUTSOURCING Russia not the most competitive on labor cost basis, need to reposition up in value chain Geographical proximity an important factor for Finnish ICT companies when outsourcing to Russia Internal outsourcing opportunities remaining regions of Russia offer cheap labor resources SOFTWARE DEVELOPMENT USA globally the main market for software products also for many Russian companies Rise of Russian locally adapted software products tailored for Russian companies Companies already international. Many software development companies have sales offices abroad, while software development takes place in Russia

14 Case of ICT Industry PUBLICATIONS Juha Väätänen, Oksana Ivanova, Anna Kyrki, Jani Lindqvist Case Study on Russian Offshore Software Development Strategy in the Making. Centre, Publication 12 Oksana Ivanova, Anna Kyrki, Yana Selioukova, Juha Väätänen Case Study on Software Development Company Opportunities & Challenges of Russian High-Tech Start-Up. Centre, Publication 15. Available in English and Russian Yana Selioukova IT Market Growth Centers in Russia: Moscow, St. Petersburg & Novosibirsk. Centre, Publication 20. Publications available at

15 Case of ICT Industry CONFERENCE PUBLICATIONS Kyrki Anna Strategic role of offshore software development: the case of Finnish-Russian outsourcing, 12 th International Product Development Management Conference, June 2005,Copenhagen, Denmark Kyrki Anna Inward internationalization in product development: the strategic role of offshore sourcing, 8 th Vaasa Conference on International Business, August 2005, Vaasa, Finland Daria Podmetina, Yana Selioukova Types of international activities of Russian IT companies, 13 th annual conference on business and marketing strategies for Central and Eastern Europe, December 2005, Vienna, Austria Kyrki Anna & Lindqvist Jani Offshore Networks in Software Development Potential of Russian IT, 31 st annual EIBA conference, December 2005, Oslo, Norway Yana Selioukova "Russian ICT market segmentation: internationalization perspective, 33 rd annual conference, Academy of international business UK chapter, April 2006, Manchester, UK Yana Selioukova Development of the IT market in the Russian regions: case of Moscow, St. Petersburg and Novosibirsk, 5 th Annual Global Business & Economics Research Conference (The Journal of American Academy of Business, Cambridge), August 2006, Istanbul, Turkey (accepted paper)

16 Thank you! CONTACT INFORMATION AND PUBLICATIONS