SERIOUS PROBLEMS
CREATING A PARTNERSHIP IN
RUSSIA
CASE 4 - 1
SUMMARY
In the mid-1990s, a medium–sized Baltic food producer
BaltFoodEx entered Russia. Reasons:
• The Baltic market did ...
BALTFOODEX OPERATED IN RUSSIA
• BaltFoodEx decided to establish a production unit in Russia by
cooperating with RusFoodPro...
BaltfoodEx disappeared in Russia quietly
and could not expand further in Baltic market
• High import duties on Baltic food...
ANSWER THE QUESTIONS
QUESTION 1:
Russia was a logical choice for the Baltic firm or not ?
• Baltic food had been quite popular among Russian an...
QUESTION 2:
List the reasons why BaltFoodEx was
interested in cooperating with RusFoodProd
and the other way around.
• Bal...
Question 3: Explain Why the cooperation
between the two case firms failed
The cooperation of 2 firms case failed because :...
Question 4:
Do you think that Baltfoodex made the
right decision to exit Russia without trying
to get a compensation for t...
Exiting Russia:
• BaltFoodEx should get a compensation or its share
in the Russian enterprise by arbitration
Never reenter...
Serious problems creating a partnership in russia
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Serious problems creating a partnership in russia

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In the mid-1990s, a medium–sized Baltic food producer BaltFoodEx entered Russia but they did not success in this market...

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Serious problems creating a partnership in russia

  1. 1. SERIOUS PROBLEMS CREATING A PARTNERSHIP IN RUSSIA CASE 4 - 1
  2. 2. SUMMARY In the mid-1990s, a medium–sized Baltic food producer BaltFoodEx entered Russia. Reasons: • The Baltic market did not offer enough growth opportunities • The Baltic food had been quite popular among Russian and other ex-Soviet Union in the Soviet time. In there, a product originated from the West was a symbol of high quality. • Although the living standard was lower than Baltic countries, Russia is an attractive market because of the large population. => BaltFoodEx`s manager think they would be successful.
  3. 3. BALTFOODEX OPERATED IN RUSSIA • BaltFoodEx decided to establish a production unit in Russia by cooperating with RusFoodPro • BaltFoodEx would support machinery to RusFoodPro and get its share in the company. • When BaltFoodEx transfer machinery to RusFoodPro, the Russian company claimed that they did not receive it and stopped the contract without giving BaltFoodEx any compensation or share. => BaltFoodEx made a loss and did not want to make problem public to protect their image.
  4. 4. BaltfoodEx disappeared in Russia quietly and could not expand further in Baltic market • High import duties on Baltic food products. • The firm cannot compete with Russian lower-cost producers. • Russian consumers were quite price conscious, market as it had planned. • Because of the financing problem, the company also failed to enter other foreign countries.
  5. 5. ANSWER THE QUESTIONS
  6. 6. QUESTION 1: Russia was a logical choice for the Baltic firm or not ? • Baltic food had been quite popular among Russian and other ex-Soviet customers in the Soviet time. (especially in the St. Petersburg and the Moscow regions with high living standard) • A product originated from the West was a symbol of high quality. • The geographically more distant countries were excluded almost from the start. (Western European countries and Soviet Socialist Republics) • Russian consumers were quite price conscious. • Baltic products would have been more expensive than the Russian ones because of transportation costs and higher salaries in Baltic countries.
  7. 7. QUESTION 2: List the reasons why BaltFoodEx was interested in cooperating with RusFoodProd and the other way around. • Baltic food had been quite popular among Russian. • Baltic food was not very familiar to Polish or Scandinavia. • Low living standard in Russia but larger population making it an attractive market. • BaltFoodEx’s managers’ good Russian language skill.
  8. 8. Question 3: Explain Why the cooperation between the two case firms failed The cooperation of 2 firms case failed because : -Lacking of awareness ( alert ) ( lack of information about reputation of partner…) - Not under protection of legal system -Not well understanding about the new market ( laws, rule to do business ) -BalFoodEx did swerve the law of taxing
  9. 9. Question 4: Do you think that Baltfoodex made the right decision to exit Russia without trying to get a compensation for the machinery or getting its share in the Russian enterprise? Was it reasonable decision never to reenter this country? Why?
  10. 10. Exiting Russia: • BaltFoodEx should get a compensation or its share in the Russian enterprise by arbitration Never reentering Russia: • It’s irrational that BaltFood decided not to reenter this country • Russia is potential for BaltFoodEx to grow

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