CREATING A PARTNERSHIP IN
CASE 4 - 1
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
=> BaltFoodEx`s manager think they would be successful.
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.
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
• 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.
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
• The geographically more distant countries were excluded
almost from the start. (Western European countries and Soviet
• 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.
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
• Low living standard in Russia but larger population
making it an attractive market.
• BaltFoodEx’s managers’ good Russian language
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
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?
• 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
• Russia is potential for BaltFoodEx to grow