675.cross border strategy and operations finnish companies in russia a collection of cases

Saint Petersburg State University
Graduate School of Management
CROSS-BORDER STRATEGY
AND OPERATIONS:
FINNISH COMPANIES IN RUSSIA
A Collection of Cases
Edited by
Andrey G. Medvedev and Marina O. Latukha
St. Petersburg
2012
Copyright ОАО «ЦКБ «БИБКОМ» & ООО «Aгентство Kнига-Cервис»

Reviewers:
Marina Yu. Sheresheva, Professor, National Research University Higher School of Economics;
Karina V. Khabacheva, Executive Director, St. Petersburg International Business Association
Cross-Border Strategy and Operations: Finnish Companies in Russia.
A Collection of Cases / Edited by Andrey G. Medvedev and Marina O. Latukha. —
SPb.: SPbSU GSOM, 2012. — 196 p.
The aim of this book is to develop an understanding of strategic and operational
decisions in internationalization process of Finnish companies entering the Russian
market. The case book reflects on experiences of several Finnish firms doing business
in Russia and provides insights for the various challenges, objectives and decision-
making alternatives companies face in real internal and external organizational set-
tings. The presented collection of cases reveals the main managerial functions to be
applied in the field of international business, in particular, strategic management,
organization design, marketing, and operations management.
This book is recommended for students of Bachelor, Master, and MBA levels
at business schools as well as professional managers in decision-making on entering
foreign markets.
ISBN 978-5-9924-0074-8
Copyright © 2012 SPbSU GSOM

CONTENTS
Preface ............................................................................................ 5
Atria: Post-Acquisition management solutions
for the Russian subsidiary
Andrey G. Medvedev...................................................................9
Nokian Tyres: A variety of investment decisions for Russia
Andrei Yu. Panibratov .............................................................. 39
YIT in Russia: Expansion to the East or escape from the West?
Andrei Yu. Panibratov .............................................................. 59
Valio: Will Viola processed cheese maintain a leading position
in the Russian Market?
Sergei A. Starov and Igor V. Gladkikh ........................................ 75
Konecranes: Balancing scale of operations and quality of services
in the Russian B2B market
Andrei Yu. Panibratov and Marina O. Latukha ............................125
K-Rauta: Expansion in Russia in a time of world crisis
Vitally I. Cherenkov.................................................................143
Skanska: Withdrawal from the Russian market —
failure or part of a strategy?
Andrei Yu. Panibratov..............................................................175
List of Contributors.......................................................................194

5
PREFACE
This book is the result of multi-year collaboration between two lead-
ing European business schools: Aalto University School of Economics and
St. Petersburg State University Graduate School of Management. Together
with the authors’ extensive experience in research and teaching in inter-
national management (with the main focus, for obvious reasons, on Finn-
ish companies and Russia as a primary destination for internationaliza-
tion) this has finally led to the appearance of this book.
Historically, Russia and Finland have an extensive tradition of scien-
tific and business cooperation. With its very long shared border, Finland
has always been closely connected with Russia and Finnish companies
have become very familiar with the Russian business and policy environ-
ment. At present, the cooperation between Russia and Finland focuses on
Northwest Russia, in particular the Republic of Karelia, the Leningrad
Region, Murmansk Region, and the City of St. Petersburg. This is clearly
one of the main reasons why Finnish companies, in most cases, choose to
start their foreign operations in Russia and St. Petersburg and why many
Finnish and Russian universities have recently conducted various studies
on Russia, its business environment, company strategies, and management
practices.
The outward movement of Finnish companies is an increasingly im-
portant phenomenon. Despite recent setbacks in the world economy, the
growth of companies entering emerging economies continues and Russia
is still seen to be a challenging direction for companies that are expand-
ing around the world. The knowledge gained from joint research activities
and long business and economic relationships between Finland and Russia
is mirrored in educational collaboration, such as in developing graduate
and postgraduate programs in universities in both countries. Courses such
as Doing Business in Russia or Business Strategy for Emerging Markets
are included in the curriculum of almost all international business sub-
jects taught in business schools. Many Finnish universities invite Russian
colleagues (including the authors of this book) as visiting professors for
these courses. An interesting fact is that these courses are usually based
on examples of real companies showing concrete strategic and operational

6
Preface
decisions taken by Finnish firms. In other words, each course is always
followed by a set of case studies aimed at integrating theoretical concepts
and practical experience.
The main feature of this book is that it consists of a collection of
case studies. Each case is devoted to a specific company and identifies
the real business situation the firm faced on entering and operating in
the Russian market. Starting with cases about the strategic opportunities
for Finnish companies in Russia, the book includes cases devoted to the
post-entry operational decisions in the areas of marketing, finance and
organizational behavior. This not only shows the variety of managerial
practices that can be vital for understanding how firms operate in a for-
eign business environment but also helps identify and develop a helicopter
view for planning and implementing an internationalization strategy.
There is no doubt that the use of case studies in business education
is very popular. The reason for using case studies is to simulate real
situations in a classroom where a range of discussions would usually be
needed to understand the complexities of the decision-making process. In
addition to developing analytical skills for critical thinking and problem
solving, case studies actually show problems, managerial tasks, strategic
and operational objectives, and challenges for managers in a changing in-
ternational environment. The case method often involves students analyz-
ing business situations both in complex and in detail with a factual de-
scription of a challenge or task faced by a company together with the ex-
ternal and internal environment, and management alternatives. Any case
study used during the education process pushes students to understand
and develop their own views on solving a wide range of organizational
problems. The case method helps students not only find, understand and
analyze the information, but also conceptualize and lay it out for deci-
sion making. During case study analysis students may also play differ-
ent roles such as researcher, investigator, creator, ideas generator, etc.
that develop very important competencies for business and management.
Therefore, we took the case method for explaining company results as it
proved to be the main and only effective tool for connecting theory and
practice in the educational process.
The purpose of this book is to familiarize management students with
practical implications of international business theory and some rules on
how to undertake business activities in Russia including foreign trade
operations, industrial cooperation deals, and foreign direct investment
projects. The book is aimed at those readers who are interested in under-
standing why Finnish companies go abroad, how they internationalize, and
what their perspectives are. Therefore, the book’s first, principal objective

7
Preface
is to enhance the reader’s understanding of the real internationalization
motives of Finnish companies. The second is to show the range of strate-
gies and explain the choice of entry modes and post-entry operations by
Finnish firms in Russian markets. The third is to discuss the prospects
for future development of Finnish companies in Russia.
The book may serve as a useful support for international manage-
ment studies at all levels of business education. The stories presented in
this book are widely used at St. Petersburg State University Graduate
School of Management as instructive cases to be analyzed by students at
Bachelor, Master, and MBA levels. In particular, these cases are used on
the International Management course of the school’s bachelor programs.
Some cases may be effectively used on the International Business Strategy
course delivered to students of CEMS-MIM and Master in International
Business programs. They may also help when studying Marketing and In-
ternational Marketing courses at both Bachelor and Master levels.
The Nokian Tyres and YIT cases are good illustrations of how firms
decide on their foreign operation methods for their initial foreign entries
and may be used while studying the foreign entry mode topic. These com-
panies followed several stages for developing their activities in Russia
before selecting a greenfield mode for establishing a substantial presence
in both the Russian industry and the Russian market of car tyres and
construction services. Post-acquisition management solutions are well il-
lustrated by the Atria case, which focuses on how to integrate the activi-
ties of a newly acquired subsidiary into the overall corporate set of oper-
ations. This case may be included in the subsidiary-level strategy topic in
the International Management or International Business Strategy course.
Marketing issues are better presented in the K-Rauta and Valio
cases. In particular, these cases illustrate how firms have adjusted their
consumer products or services to non-domestic conditions; therefore they
may be used in topics such as market segmentation, branding, or promo-
tion policy within the Marketing or International Marketing course. In
the Industrial Marketing course, the Konecranes case may provide a good
platform for discussing B2B relations, long-term cooperative agreements,
and strategic alliances. This case may also find its application in the Op-
erations Management course and in topics devoted to quality management
in companies.
As industrial characteristics may significantly influence decisions tak-
en by company managers in foreign countries, the YIT and Skanska cases
are of particular interest in showing how management solutions are af-
fected by regulations and competition in the Russian construction sector.
These case studies may be considered in several International Management

8
Preface
course topics. The Skanska case is particularly important in understand-
ing the reasons to divesting operations in a foreign country.
The authors are certain that the cases presented in this book will
help both students and acting managers understand better how to make
decisions on entering foreign industries and markets, which foreign op-
eration methods to select and how foreign operations should be integrated
into the corporate set of activities. This book could also be interesting for
managers and specialists from different industry-related companies that
are planning to go abroad or already have foreign operations, in order to
gain practical experience from the examples presented in this book.
Andrey G. Medvedev
Professor, Graduate School of Management,
St. Petersburg State University
Marina O. Latukha
Associate Professor, Graduate School of Management,
St. Petersburg State University

9
Andrey G. Medvedev
ATRIA:
POST-ACQUISITION MANAGEMENT SOLUTIONS
FOR THE RUSSIAN SUBSIDIARY
In 2005 Finland-based Atria entered the Russian industry by acquiring St. Pe-
tersburg–based Pit-Product which is now a subsidiary of Atria Plc. Established in
1996, Pit-Product is the largest meat processing company in the City of St. Pe-
tersburg and surroundings. This case describes the activities Atria undertook in
Russia, emphasizing the post-acquisition integration of Russian operations into
the overall Atria strategy. It includes the description of the pre-acquisition situation
and arguments in favor of Atria’s Russian expansion; the process of selecting
an internationalization mode, the terms of the acquisitions and of Atria’s other
deals in Russia; the beneﬁts of the Russian expansion for the Atria Group; the
situation that emerged at Pit-Product and other Atria divisions in Russia and
post-acquisition solutions.
INTRODUCTION
In March 2006, Juha Ruohola, recently appointed as Atria Russia
and Baltic Director, was preparing for a meeting with other members of
the Atria Management Group to present his views of how to integrate
Pit-Product, a newly acquired subsidiary of Atria in the City of St. Pe-
tersburg, into the Atria Group. He was still working as the Purchasing
and Investment Director of the Group and had considerable credibility
with the Management Group. Yet, as he clearly acknowledged, there were
significant problems in governing the integration process with the aim
of improving the St. Petersburg subsidiary’s effectiveness. Operations in
Russia posed a challenge to the company’s overall know-how, and success
in meeting it would support the Group’s further progress.
The author would like to appreciate Juha Ruohola, Executive Vice President,
Atria Russia, and Sergey Ivanchenko, General Manager, Atria Russia, for their kind
support and valuable remarks.

10
Atria: Post-Acquisition Management Solutions for the Russian Subsidiary
He looked at the slides again. „I have to emphasize how strongly
the new Russian project fits our internationalization strategy”, Ruohola
thought. Entry into Russia appears to be the next logical step for Atria.
For several years, Atria Group’s vision was to become the industry leader
in offering meat products and meal solutions in the Baltic Sea region.
The Baltic Sea region is a natural substrate for Atria Group’s growth.
Despite its national and market-related special characteristics, the Baltic
Sea region is evolving into a contiguous market region. This provides
Atria with opportunities for furthering both its turnover and its profit-
ability.
Ruohola recalled his scholars at Turku School of Economics, where he
graduated with an EMBA in 1999. They always emphasized that a firm
developing its foreign expansion strategy must have clear answers to five
questions. These questions are „why”, „what for”, „where”, „when” and
„how”. The answer to the first question, „why”, is evident to managers at
many Finnish companies. They recognize clearly that developing the do-
mestic operations in the traditionally small domestic market at the same
rate as international operations is hardly possible.
Thus, Atria being a leading meat processing company in Finland (see
the brief overview of the company in the next paragraph), had little op-
portunity to achieve significant growth on the domestic market. Growth
through M&A in the Finnish meat processing industry would inevitably
be blocked by the antimonopoly authorities.
OVERVIEW OF ATRIA (2005)1
Established in 1903 in Finland, when its oldest owner co-operative
was founded, Atria Group Plc operates in the food industry, in particular,
in meat and poultry slaughtering, cutting and processing and the manu-
facturing of meat products, such as sausages, frankfurters and all-meat
products, meat delicatessens and convenience food. Atria’s customers are
the retail sector, restaurants, and hotels, the public sector (schools, hos-
pitals, armed forces etc.) and industry. The Group’s factories are located
in Finland, Sweden, Lithuania and Estonia. Its foremost brands are Atria,
Dukes, Forssan, Lithells, Grillköket, Maks & Moorits, Vilniaus Mesa and
others. Atria Concept AB, a fast-food division of Atria Group owns the
Sibylla brand, which is well recognised in Northern and Eastern Europe.
Atria’s market share in Finland is 30%; the Group is the largest manu-
facturer of meat products in the Baltic Sea Area. In 2005, the Group
had a turnover of €976.9 million and an operating profit of €40.2 million.
1
Atria’s overview is based on the company records and data.

11
The head office of the Group is located in Nurmo, Finland. The Group
comprises five manufacturing plants in Finland, three in Sweden, one in
Lithuania and one Estonia. The Group employs some 4,400 people. Since
1994, the Group shares have been listed on the Nasdaq OMX Helsinki.
ATRIA’S INTERNATIONALIZATION
Atria’s acquisition in Russia was just the latest step in a process of
internationalization that had begun a decade earlier. Expanding first to
Sweden in 1997, by 2005 Atria’s operations in Sweden, Lithuania, Estonia
and Russia accounted for 35% of its €976.9 million group-wide turnover.
(Table 1 summarizes Atria’s international expansion).
Table 1
Atria’s internationalization timetable
Source: Company records.
Throughout its early expansion into Sweden, the company adhered to
a set of principles established by Seppo Paatelainen, the Atria Group’s
CEO 1991–2006. „The Finnish company has not to introduce its own
brand onto foreign markets but must instead work with its foreign sub-
sidiaries in promoting a well-recognized local brand.”2
Atria Group's first acquisition in Sweden in 1997 brought the expe-
rience needed to develop a more international company to the organiza-
tion. Besides investment in Sweden, Lithuania, Estonia and Russia, the
company exports its products to the retail market in Latvia as well as
to fast-food chains in Finland, Sweden, the Baltic States, Denmark and
Poland.
2
St. Petersburg Times, June 17, 2005.
Year Countries Entered
1997 Sweden
2003 Lithuania
2004 Estonia
2005 Russia

12
The share of exports in the turnover of Atria Oy, the Finland-based
division of Atria Group, rose from 1.3% in 2000 to 11% in 2004, but
acquisitions of manufacturing facilities in other countries reduced the
share of Atria Oy’s exports to 7% of its turnover in 2005.
The answer to the second question, „what for”, seemed just as ob-
vious. The main aim of internationalization is the company’s growth.
Sustainable profitable growth is identified as the Group’s main task in
all of Atria’s reports. Juha Ruohola remembered that a large number of
products manufactured by Atria and its subsidiaries had already occupied
a high market share in Sweden. In four of the six product groups, it
exceeded 20%, reaching 40% for packaged goods. However, according to
some forecasts, the growth of the Swedish consumer market was expected
to be 0.5–1.5% per year. It was also evident that, while the Baltic mar-
kets are nearby, they cannot become significant due to the small size of
the individual countries’ markets. Therefore the answers to the third and
fourth questions of the foreign expansion strategy, „where” and „when”,
went without saying: „in Russia” and „as soon as possible”. A great deal
of research confirmed that progress in Russia could be based on the as-
sumption that the size of the Russian operations could, if successful,
grow enormously in the future.
The situation called for a quick decision, yet Atria’s managers were
cautious. They had to weigh all the pros and the cons before they started
preparing a Russian entry plan for the company.
FEASIBILITY STUDY IN RUSSIA
Before entering Russia, Atria’s managers and experts made a pre-
liminary study of the investment climate in Russia, first of all in the
Northwest of the country (see map in Exhibit 1), and of particular op-
portunities Atria had to start its business operations there. Besides St.
Petersburg, the situation in Moscow, Samara and some other cities in
Russia was also evaluated.
The results of the study sparked Rouhola’s interest.
Among the general political and legal characteristics of the business
climate in Russia, Atria’s managers highlighted the opportunity to invest
directly in Russian companies with 100% foreign ownership which is al-
lowed by the Russian legal system, and the convertibility of the Russian
ruble for current transactions which is enough to serve export and import
operations (since July 2006, the ruble have been a fully convertible cur-
rency). The substantial level of corruption in the country and the insuf-
ficient transparency of businesses were marked out as threats.

13
Exhibit 1. North and North-West economic zones of Russia
Among the macroeconomic characteristics, high growth rate of the
Russian economy was emphasized, as well as the high inflation level and
relatively low labor and energy costs. Very important social factors, such
as improvement in people’s quality of life and growth of their purchas-
ing power were mentioned as pre-conditions for an increase in meat con-
sumption. In the St. Petersburg market area, development trends were
positive in such product groups as raw sausages, smoked raw sausages,
cured sausages, frankfurters and small grill frankfurters, and all-meat
products3
.
Among technological factors in Russia, one could mention the avail-
ability of professional engineers and technologists, in the food sector in
particular and also the obsolete technical base in many industries. Fur-
thermore, a noticeable lack of qualified management staff was detected.
3
Atria Annual Report, 2005, p. 27.

14
On the whole, the investment climate in Russia could be assessed as
completely adequate for the targets stated by Atria’s management in re-
spect to the company’s expansion to the East.
THE INDUSTRY STATEMENT AND COMPETITION
The industrial analysis made it possible to distinguish several char-
acteristics of the meat processing industry in Russia relevant for the
company’s business performance: quotas for meat and poultry imported
into Russia, continuing talks on Russia’s WTO accession, the high level
of state expenditures to develop the Russian agricultural sector as part
of the so called „national projects”. As a part of the industrial analysis,
the main characteristics of the meat processing industry in Russia were
compared with those in Finland (see Table 2 for the characteristics of the
industry in 2005).
Table 2
Some characteristics of the meat-processing industry
in Finland and Russia
Finland Russia
High level of consolidation
(CR3 about 80%)
Low level of consolidation
(CR3 about 20%)
Small number of meat processing
companies (5)
Large number of meat processing
companies (about 60)
Low share of imported meat raw
materials (about 5%)
High share of imported meat
(about 50%)
High level of consolidation of grocery
retail (CR3 about 85%)
Growth in centralized retail trade — rapid
development of Russian and foreign retail
chains
Growth in purchasing power of families
High level of meat consumption
(70 kg per capita annually)*
Low level of meat consumption compared to
developed countries
(50 kg per capita annually)
*
Note: In Sweden — 80 kg.
Source: Author’s interviews with market analysts.

15
The most important conclusions of the industrial analysis were the
following. Consumption of meat products grew annually by 15% in value
terms. Every year the share of expensive products was growing by 2–3%.
In 2005, the share of expensive sausages was 20%. However, per capita
consumption of meat and quality sausages significantly lagged behind the
European level. In 2005, the production volume of sausage products still
grew and amounted to 2 million tons which is 5% more than in 2004.
Sausages hold fourth place after dairy, fruit, vegetables and bread and
bakery among FMCG products.
More than 97% of products in the Russian market are provided
by local producers. It has been the regional, rather than the national,
players, that have fared best in the Russian meat market, according to
Musheg Mamikonyan, president of the Meat Union.4
The financial crisis
of 1998 was a turning point for Russia’s domestic production of food
stuffs. In 2000–2005, the imports of unprocessed meat grew substantial-
ly. However, the imports of meat end-products have recovered very slowly
which means that the Russian food industry recovered with the aid of
imported raw materials while foreign producers have been unable to reach
pre-crisis export levels in processed food products5
.
The competition in St. Petersburg, the country’s second largest sau-
sage market located next to Finland, is weak. Small companies representing
manufacturing capacities of 1 to 3 tons of meat products daily and produc-
ing un-branded products or not well-known brands, cover about 50% of the
local market. Large producers must have strong brands and sound advertis-
ing budgets to increase their market shares by replacing smaller players.
Industry experts estimate the annual advertising cost needed to introduce
and support a new brand in the market at no less than $1 million.
Trying to define a type of competition in the industry on the basis
of the „multi-domestic — global” dichotomy, managers at Atria were re-
lying on the practices of world players rather than on their own, as of
yet limited, experience in internationalization. Though many process tech-
nologies in the meat industry are the same in many countries, a product
policy and other marketing components have to take account of local
(national) peculiarities (taste preferences of the customers, traditions and
habits, cultural differences, etc.). As Alexey Soshnikov, Moscow-based
Dymov company General Director, explained, it is complicated to gain
new regional market in the meat-processing industry. One reason for this
4
St. Petersburg Times, June 17, 2005.
5
Kaipio H., Leppänen S. Distribution systems of the food sector in Russia: the
perspective of Finnish food industry. http://www.hse.fi/NR/rdonlyres/E35C21BC-
E473-436E-B73F-59DE390123C2/0/distribution_foodstuff.pdf

16
is that the consumer prefers meat products produced by a trusted local
manufacturer, and the quality of meat products implies freshness first
of all. The company has to implement an appropriate strategy in every
new territory trying to understand what product to offer on that market
and what are the advantages the company has compared to its rivals that
have operated in that market for a long time. Local products are usually
cheaper. A manufacturer from another region can hardly keep low prices,
partly because of logistics costs.6
Juha Ruohola looked at a study concerning the public image of Finn-
ish food products in Russia. The study showed that the Finnish origin of
a product still signifies quality for Russians, but now the situation has
changed so foreign origin alone is no longer impressive. So, the Finnish
label does not give any extra value for the product7
. We should find a
mode of operations in Russia which helps us explore the ability of a local
partner to sell products in the Russian market effectively.
SELECTING AN ENTRY MODE
The fifth question for a foreign entry strategy is devoted to the se-
lection of the most appropriate foreign operation method in Russia. Atria
had already been exporting its products to Russia for several years. The
monthly volume of exports was about 200 tons of raw materials for some
$0.5 million. The St. Petersburg market alone consumes about 1,500 tons
of meat monthly; 90% of this amount is imported from Germany, Hun-
gary, Poland and Latin America. Thus acquiring a local meat-processor
served as a forward vertical integration for Atria. Faced with an overpro-
duction in the domestic market, the company could receive a guaranteed
market for meat raw materials.
The exportation of meat products practically was not up for a point
of discussion. Certainly, exportation is usually the simplest and least risky
method for foreign entry. In principle, Atria could use its production fa-
cilities in Scandinavia to supply the demand in the Russian market; there
would be little start-up cost. There would be several constraints, however.
As a multi-domestic player, Atria Oy had very limited experience in the
exportation of meat products. The company could face an import duty on
their products; in addition, Atria would be considered an outsider because
its products would not be made with local factors of production.
6
RBC daily, June 17, 2005.
7
Kaipio H., Leppänen S. Distribution systems of the food sector in Russia: the
perspective of Finnish food industry. http://www.hse.fi/NR/rdonlyres/E35C21BC-
E473-436E-B73F-59DE390123C2/0/distribution_foodstuff.pdf

17
A joint venture with an existing Russian company would be attractive
from a financial viewpoint. The managers of an existing Russian company
would be knowledgeable about the market and have established contacts
and customers. But Finnish businessmen have historically been worried
that making managerial decisions at joint ventures in Russia could pres-
ent problems if the partners represent different management styles and
look for different strategies for the jointly owned venture.
Atria’s managers practically never discussed the possibility of setting
up a new wholly owned subsidiary in Russia. On the one hand, it would
give the company a chance to build a new and modern production facil-
ity. On the other hand, creating a new establishment would need substan-
tial investment and time to build and staff a new facility. Besides, the
lack of management familiarity with the local business conditions could
raise some problems. The Atria’s managers would also lack contacts in
the industry and the local area.
From the very beginning, the company’s management was drawn to
the acquisition of an existing company as the most suitable entry mode
in Russia. If Atria purchased an existing company, the facility and
workforce would already be in place. They would have to modernize the
production site and retrain the workers, but they would have established
contacts to help Atria gain markets in Russia. Certainly, there was a risk
that the managers and workers might not respond well to a take-over
by a foreign company and that they might not be willing to adapt their
style of work. However, there were definitely several arguments in favor
of acquisition. To become a successful player in the local foodstuff mar-
ket, a foreign company must be „local” in the market (e. g. the brand,
tastes, habits). Thus, it is precisely the takeover of a sizeable local actor
that would deliver the market share, brand equity, cash flows and a good
source of growth for the entire group. Besides, acquiring local manufac-
turers might deliver a guaranteed raw material market to Atria and help
the company make preparations for Russia’s WTO accession.
In February 2005, Atria Group officially declared that it has plans
to expand its business operations into Russia. As it was mentioned in a
statement signed by Seppo Paatelainen, the company was hoping to es-
tablish business operations in Russia for a year and a half and came to
the conclusion that „this market is of a great interest, it promises suc-
cessful companies a fast growth. Today, we can declare that realization
plan is near its completion, however the specific dates will be announced
only after making the final decision on this program”. Managers at Atria
maintained that acquiring assets in Russia would strengthen Atria’s posi-
tion in Northern Europe where the company is the biggest manufacturer

18
of meat products. Seppo Paatelainen said: „We are mostly concerned with
the raw materials deliveries. If we have a big partner, we may increase
our exports to Russia”.8
Atria Group Plc made a broad review and analysis of companies in
the St. Petersburg market. As early as in 2004, Atria asked the Finn-
ish-Russian Chamber of Commerce about meat-processing companies in
St. Petersburg area. According to the experts, only the Kronshtadtsky
meat-processing plant and Pit-Product could be of interest to Atria in
St. Petersburg: they were not very big but had relatively modern plants.
Dmitry Gordeev, President of the Meatland Group, valued Kronshtadtsky
at $30 million and Pit-Product at $10–15 million. According to Gordeev,
Atria is well known in St. Petersburg market, since the company supplies
it with a large volume of sausages and frankfurters.9
Finally, in June 2005, it was announced that Atria Group and the
Pit-Product group of companies had signed an agreement on strategic
partnership. In accordance with this agreement, Atria Group took on the
role of a strategic investor and entered the share capital of Pit-Product.
The two companies found a mutual interest in each other. Pit-Product’s
owners themselves were looking for a strategic investor.
As Gleb Ognyannikov, a representative of Pit-Product’s shareholder
group, Board Member at Trigon Capital, a Scandinavian investment bank
representing owners of Pit-Product, explained, „the search for investor
took two years, and Atria Group’s proposals proved most interesting from
the viewpoint of further development of Pit-Product’ business. We are
planning to enlarge our market share from 20 to 30%, expand the diver-
sity of our portfolio significantly and increase sales volume”.10
In November 2005, Atria acquired 100% of Pit-Product’s shares after
the deal had been approved by the Federal Anti-Monopoly Service. The
deal was facilitated by the fact that Gennady Yemelianov, an owner of
Pit-Product, demonstrated his willingness to sell the business to a strate-
gic investor like Atria. When Pit-Product had been established, Gennady
Yemelianov was its founder and the only owner. In 2001, under a re-reg-
istration procedure, the shares were split between Gennady Yemelianov,
Tatyana Yemelianova (they both have 45% of the shares) and Gennady
Novikov (about 8%). The company’s profitability had been falling in re-
cent months, and the competition was becoming tougher, so the owners of
Pit-Product were thinking more often about selling the company.
8
Delovoy Peterburg, June 16, 2005.
9
Vedomosti, February 22, 2005.
10
Delovoy Peterburg, June 17, 2005.

19
TARGET COMPANY
Juha Ruohola was sure that the decision to acquire the Pit-Product
Group in St. Petersburg was absolutely well-grounded. (Table 3 summa-
rizes Pit-Product’s main characteristics as of 2005).
Table 3
Brief overview of Pit-Product Group
The company was established as a sausage plant in April 1996 in St. Petersburg.
In 1998, it started manufacturing conventional and original delicatessens and ex-
clusive products at a new facility. At the same time, a vacuum system for product
packaging was introduced.
In 1999, Pit-Product introduced modern, ecologically friendly, smoking technol-
ogy. In 2001, another factory was established with its own slaughterhouse in the
village of Sinyavino some 40 kilometers outside St. Petersburg (in the Leningrad
Region). In 2002 and 2003, two new workshops started to produce raw smoked
products.
The company acquired a pig-breeding farm in the Village of Irinovka, Leningrad
Region and reconstructed it from the ground up. A bit later, Pit-Product began to
use new FLOW-PACK equipment for sausage packaging, a new SHIWA production
line to cut sausage products, and two new Sorgo climarooms. All of these innova-
tions allowed the company to increase production volumes and the diversity of its
portfolio of dry smoked sausages.
Pit-Product’ products are available in all large retail chains in St. Petersburg as
well as in most unchained outlets. As early as in 1999, the company had established
a successful partnership with the Pyatyorochka economy class outlets. In summer
2003, the first Pit-Product’s branded outlet opened in St. Petersburg.
In 2003, expansion to other parts of Russia continued: the products of Pit-Product
began to be delivered to the Republic of Karelia, Tver, Murmansk, Novgorod and
Arkhangelsk Regions as well as to the Far East of Russia (see Exhibit 5). In 2004,
the company formed strategic alliances with the Lenta chain of hypermarkets, the
Dixy discounter and the Ramstore supermarkets.
Pit-Product’s assortment includes 200 different sausages and meat products
(of which frankfurters and grilled sausages cover 51% of sales, raw sausages 26%,
partly smoked sausages 12%, smoked sausages 5%, and cured sausages and sliced
products 6%). The company has grown at a rate of 30–50% in recent years.
In 2004, production volume totaled 15.5 thousand tons, and 19 thousand tons
are planned to be manufactured in 2005. By the completion of the acquisition deal,
Pit-Product was one of St. Petersburg's largest meat processors. Its share in the
St. Petersburg meat product markets in 2004 was approximately 13%; in 2005 its
market share for frankfurters and boiled sausages was close to 20%.
Source: Company web-site: http://www.pitproduct.ru/company/history.thtml

20
Pit-Product has a good location in the healthily growing St. Peters-
burg market. The St. Petersburg sea port is exactly the place to receive
the main quota of imported meat. The company has a high growth po-
tential. By 2005, its turnover reached €65 million. Pit-Product employs
over 1,100 people. Among its important advantages, one could mention
the availability of three warehouses, well established supply of meat raw
materials and good coverage of modern retail.
OBJECTIVES AND STRATEGIC PLANS
The acquisition of Pit-Product corresponded with Atria Group’s Baltic
Sea regional strategy and allowed Atria to use its previous experience of
internationalization effectively. Even though the practices of manufac-
turing and marketing implemented in Finland could not be transferred
unchanged to the subsidiary, they created a good basis for specific ap-
plications in Russia.
Exploring market opportunities in Russia. The acquisition of Pit-
Product created new opportunities for the entire Group. According to
Seppo Paatelainen, integration of Pit-Product into Atria’s business would
allow the whole group to operate efficiently on the immense Russian mar-
ket. „In the near future, the main challenge for Atria Group is establish-
ing itself in the Russian market through St. Petersburg. First we will
focus on Pit-Product takeover and learn how to operate in Russia. We
have already begun planning for a new logistics centre and production
plant. In the longer term, expansion to other areas in Russia, like Mos-
cow, is also possible”.11
With Pit-Product, and its history of success in
the North-West Russia, Atria would be able to plan penetration of other
regional markets in Russia.
Improvement in manufacturing and procurement. Several tasks neces-
sary for achieving synergy were already obvious to Atria’s management.
To raise the performance of Pit-Product’s business operations, it was de-
cided to invest €20–30 million in improvement of manufacturing processes
to increase the production of meat delicatessens, and in the promotion of
the Pit-Product brand. The appearance of a Finnish investor allowed Pit-
Product to solve several of its strategic problems. Atria has access to re-
sources through its own agricultural companies. As early as in the autumn
of 2004, Atria invested approximately €21 million in the enlargement and
basic renovation of the company’s pig slaughterhouse in Nurmo, Finland.
Access to sufficient quality resources via the parent company can help Pit-
Product ensure uninterrupted production of cooled pork.
11
RBC daily, June 17, 2005.

21
Meeting the demands of retail chains. Another important task for
Pit-Product is building profitable relationships with retail chains. The
centralization and concentration of the retail trade has generated huge
challenges for the food industry producing fresh food. The private labels
of retail chains are beginning to threaten traditional meat brands. Based
on his experience in Europe, Seppo Paatelainen predicted that „manufac-
turers will face much more serious competition from private labels of re-
tailers, rather than from each other”. Growth in delivery density, smaller
onetime purchases and the freshness requirements for fresh products is a
tough challenge for the industry. The internationalization of retail chains
has led to very important challenges for Atria Group. Their target re-
gions were becoming large, so they wanted to co-operate with firms whose
business and products are internationally competitive. (Table 4 presents a
list of top the ten food retailers in Russia.)
Table 4
Top ten Russian food retailers
Source: Standard & Poor’s, July 29, 2005.
Ranking growth
(%)
Retailer
Revenues,
$ million
Year-on-year
1 Pyaterochka 1,425 50
2 Metro 1,059 61
3 Tander 894 45
4 Perekrestok 771 72
5 Auchan 640 61
6 Seventh Continent 600 46
7 Ramstore 550 22
8 Dixy 490 60
9 Lenta 476 55
10 Kopeyka 415 70

22
To ensure the delivery capacity and reliability of Pit-Product, Atria’s
top management immediately put a new logistics center in the St. Peters-
burg area on the agenda. The logistics center was seen as vital to setting
up the steady supply of fresh meat and processed meat that major gro-
cery retail chains demanded from meat processors. It was estimated that
the construction of a modern logistics center would cost between $7 mil-
lion and $12 million.
As Seppo Paatelainen noticed, successful organization of all ope-
rations and the construction of an ultra-modern logistics center have
enabled a top-quality, cost-efficient operating chain of top quality that
satisfies the customers in St. Petersburg and the surrounding areas.
Maintaining and developing this position in the future is extremely im-
portant for Pit-Product. Though Pit Product only supplied about 40%
of its products to supermarket chains, mainly to economy class outlets
Pyatyorochka, Nakhodka and Kopeyka, managers of the company hoped
to raise that number, as they were in talks with Metro Cash & Carry
and other retailers.
According to Sergey Yushin, Head of the executive committee of
the National Meat Association, the construction of a logistics center for
deep frozen products is well-timed. Most of the meat supply for the Rus-
sian market goes through the St. Petersburg port. Large trade companies
located in the city face the problem of storing the products creating a
large unmet demand for logistics centers and modern freezers in St. Pe-
tersburg.12
90 DAY INTEGRATION PLAN
In the beginning of 2006, the parent company made a decision to
change the group’s development strategy. Instead of autonomous country-
specific organizations Atria would become a unified globally managed
group with a single development strategy and management approach. The
basic goals behind this change were optimization of corporate financial
management, acceleration of decision-making and greater focus on clients
and consumers.
However, implementing the new strategy turned out to be difficult.
Immediately after acquiring the St. Petersburg company, Atria Group
managers faced a number of problems. After several months of growth,
the profitability of Pit-Group dropped. Ruohola looked at the slide listing
the problems. The daughter company lacked clear accounting standards;
12
RBC daily, October 26, 2006.

23
the logic of financial management (from purchasing to sales) was ir-
reconcilable with Atria’s. The distribution of responsibilities within Pit-
Product was ineffective; the meetings of the Board of Directors were
erratic. Management was mostly reactive. The organizational structure
was ponderous and confusing. It turned out that for a long time Gennady
Yemelianov, the General Director of Pit-Product and the founder of the
company was the only one making strategic and operating decisions in
the company. Functional managers from Atria, who tried to integrate the
corresponding divisions of Pit-Product into the global management struc-
ture, could not easily understand how these divisions were managed.
All these problems forced Group management to think about steps to
fix the situation. A 90-day plan for integrating Pit-Product into Atria
Group structure was born. There was a tradition among the managers of
the company to evaluate the results of strategic decisions 90 days after
they were made. As Ruohola’s colleagues joked, „it’s as many as 10 days
faster than the traditional 100 days”.
There were important reasons for appointing Juha Ruohola as Atria
Russia and Baltic Director. He had worked at the company since 1997,
first in Finland, then later in 1999–2001 in Sweden, where he was
responsible for integration of the Swedish subsidiaries. After that he
worked in Estonia and now he came to Russia. Wherever he was in the
world, Ruohola was always faced with the familiar task of integrating
a new division into the whole Atria Group structure. For two months,
Ruohola observed how the St. Petersburg company worked, studied its
organization, culture, and principles of corporate governance. He was
a chief contributor to the 90-day plan for integrating Pit-Product into
Atria Group structure.
Tasks of the integration plan. Before starting to realize the inte-
gration plan, managers had defined an integration approach, identified
functional units for integration, and assigned the ‘working pairs’ for
each unit. At this stage, three critical tasks were defined and assigned
for the ‘working pairs’ within each functional unit. To provide for the
monitoring of the plan’s implementation, all tasks and activities had
clear deadlines.
In accordance with the management structure for the integration
project, nine functional teams were assigned: Corporate governance (CG);
Hygiene, Quality, Safety (HQS); Logistics & Distribution (L&D); Produc-
tion, Productivity, Investments (PPI); Sales; Marketing; Finance; Human
Resources (HR); and Purchasing. (Critical tasks for each functional team
are shown in Exhibit 2. Table 5 presents an example of the integration
plan for a functional team).

24
Exhibit2.Integrationplan:criticaltasksforeachfunctionalteam
Source:Companyrecords.
Sales
ABCCustomeranalysis
&salesfocus
Pricesettingand
customeragreements
Salesorganization
andsalesplans
PPI
Productionloss
reduction
Capacityutilization
improvement
Production
maintenanceupgrade
Finance
Integrationofreporting
system
”Whitening”
ofaccounts
Budgetingandreporting
offunctionalunits
L&D
Economyperfunction
&customersegment
Ownoroutsourced
Buyers’preference
→competitiveedge
CG
ThePit-Product
Boardfunction
Organization,steering
andstaffing
ThePit-Product
managementgroup
Purch.
Localsourcing
opportunities
Atria-Pitjoint
purchasingoptions
Reliability
ofmeatsupplies
Marketing
Productportfoliopricing
&profitability
Productchains&
campaigns
NPDplanning
HQS
Standardizationof
hygienepolicies
Requirementsof
Russianauthorities
Cleaning,development
andtraining
HR
On-the-jobtraining
planning
Revisionofjob
descriptions
Topmanagementaudit

25
Table 5
Integration plan for the Production, Productivity,
and Investments functional team
Task Planned activities
Deadline
Planned deliverables
Quick wins Decisions
Interim
results
Production
loss
reduction
Compare PIT vs.•
Atria production
loss statistics
Develop an Action•
Plan
Plan a new site•
Analyze recipe•
optimization
routines (not
started yet)
w 14
Planning•
process
replication
from Atria’s
existing
methodology
Minimize•
production
losses at
current
site by 5%,
assess prod.
loss for new
production
site
Started joint•
measuring
of production
losses,
w 10
Capacity
utilization
improve-
ment
Use more•
accurate demand
calculations
(discuss with
Marketing)
Receive a proposal•
and action plan for
a new production
and logistical site
Make a decision•
about extra
capacity options
w 14
Extra•
capacity
without
investments,
if contract
supplier is
found
Put together•
capacity and
production
task groups
Plan new•
process and
capacity
to new
production
site and new
logistical
centre
Find short•
term extra
capacity for
2006
Gorelovo and•
Sinyavino II
new site
offers
requested,
w 12
Extra•
capacity
calculations
completed,
w 13
Production
mainte-
nance
upgrade
Analyze machinery•
performance
and spare parts
purchasing
methods
Develop new•
working methods
with Atria’s
maintenance
department
w 14
Compatible•
data
maintenance
system
(Atria+PIT)
for launch
Compatible•
specification
of machinery
and
equipment
for launch
Increase•
produc-
tivity of
maintenance
organization,
cut down
spare part
cost by 5%
Atria’s•
maintenance
data system
to new pro-
duction site
Atria’s main-•
tenance data
system to
new produc-
tion site,
not to exist-
ing sites,
w 12
Comparison•
of spare
parts rou-
tines and
machinery
investments,
w 12

26
„Working pairs”. All task activities were led by the working pairs;
an Atria Group specialist was the team leader and was also responsible
for project deliverables. As a rule, all Atria specialists started by learning
how a process was organized at Pit-Product and took the lead in problem
solving. Representatives of Pit-Product were to provide their partners
with the relevant information on the situation in the corresponding Pit-
Product divisions and to provide local expertise in the implementation of
management and production functions. They were invited to Nurmo to
learn how similar processes were organized at Atria. Then both parties
worked on streamlining those processes.
Team meetings were held on a weekly basis, and every meeting fol-
lowed an agenda. Weekly progress reports were produced based on actual
achievements, and findings discussed with the working pairs. Pit-Product
Board progress review meetings were held once a month; Project Steering
Group meetings were held twice a month. Findings were discussed inter-
nally between functional specialists in Nurmo.
A team of consultants was invited to participate in the Pit-Product
integration project. They were to undertake the following task:
assistance in formulating an integration approach and work plans;♦
project coordination;♦
activity streamlining (when needed) and troubleshooting;♦
progress and benefit tracking of functional teams;♦
making regular reports to the Board and the Steering Group;♦
operational counseling for the „working pairs”.♦
A project consultant flagged setbacks encountered by the working
pairs and facilitated the necessary discussions.
In cases when progress was not achieved a „request-for-help” message
was sent to the Project Steering Group and the Board.
Difficulties in implementing the integration plan. When they tried
to start the integration, Ruohola and his colleagues faced many difficul-
ties. Team members from Pit-Product were poorly motivated to take an
active part in the process, and Atria’s management had underestimated
the scope of the problems to be solved through task activities. Delays in
delivery took place across several task teams, and the process was not
result driven in some teams.
When a consulting company completed the management audit at Pit-
Product using surveys and interviews, it turned out that most of the di-
rectors were not suited to their positions. The chief complaint was their
professional incompetence. While Pit-Product’s top management members

27
struggled to accept the results of the management audit, the group’s
management took decisive action, and all directors except the HR direc-
tor and the General Issues director were replaced in 6–8 months. For a
while, representatives from corporate headquarters worked at Pit-Product
(Production director, Procurement director, and Sales director). Gradually,
new Russian managers, most of them 30–35 years old, with good English
and professional competence were found and appointed as directors.
Sergey Ivanchenko was an outstanding figure in the new cohort of
Pit-Product’s directors. Born in Krasnodar in the South of Russia and
educated at a local university where he received a degree in the field of
mathematical economics, he passed the President of Russia’s Program in
management education. Later, Ivanchenko spent several years in Sweden
where he worked for a couple of Swedish companies, operating in a num-
ber of foreign countries, including Russia. Looking for new candidates
for Pit-Product, Matti Tikkakoski, who joined Atria in 2006 as the Presi-
dent of the Atria Group, remembered how he met Sergey one day in Swe-
den and recommended him for the position of Financial Director. Sergey
Ivanchenko joined Pit-Product in August 2006 and was instrumental in
the implementation of the integration plan at Pit-Product.
Organization structure. Ruohola often recalled his first days at
Pit-Product. Gennady Yemelianov, Pit-Product’s General Manager, had
16 functional directors subordinate to him (see Exhibit 3). At 9 o’clock
every morning, the General Director met his subordinates, who were
waiting for immediate directives. The rationale for this structure had
been Gennady Yemelianov’s ultimate policy of keeping all activities at
Pit-Product under direct control, which made the delegation of responsi-
bilities and operational freedom impossible. However, he failed to explain
some of the titles in Pit-Product’s top management team to the Atria
specialists and HR consultants.
In spite of Yemelianov’s evident resistance, it was clear that this
structure had to be radically changed. So, one day, Juha Ruohola held
out a sheet of paper to Gennady and said: „Look! Here is a new organi-
zational chart! It contains all the necessary pre-conditions for effective
management!” (Exhibit 4 presents the new structure.)
Though the old Managing Director did not understand the new struc-
ture well, it had been approved by Atria executives and went into effect.
Gennady Yemelianov remained the General Director of Pit-Product until
November 2006, when Juha Ruohola replaced him (Ruohola continued
work as Group Vice President for Baltic and Russian operations and as a
member of Atria Group’s Executive Team). Yemelianov took a position on
the Board of Directors; he left the company in May 2007.

28
Exhibit3.Pit-ProductOldOrganizationStructure
Finance
Director
Marketing
Director
IT-
Director
QualityControl
Director
Production
Director(SPb)
SinyavinoSite
Director
GeneralIssues
Director
HR
Director
Production
Director
(Sinyavino)
Approvals
Specialist
MeatSupplies
Specialist
Construction
Director
Chief
Engineer
InternalControl
Director
Strategy
Director
OtherSupplies
Specialist
ManagingDirector

29
Exhibit4.TheneworganizationstructureofPit-Product
Finance
Director
Logistics
Director
Production
Director
HP
Director
PP’sBoardofDirector
•Atria’sCEOandPresident
•Atria’stopmanagers
•Relocatedfrom
Nurmo,Expat
•Hired
byAtria
•Expat
Sales
Director
•Hired
byAtria
Marketing
Director
•Relocated
from
Vilnius
•Expat
•Hired
byAtria
Purchasing
Director
•Relocated
from
Nurmo
•Expat
•Hired
byPP
before
Atria
•Hired
byAtria
ManagingDirector

30
INVESTMENT PROGRAM FOR RUSSIA
The need to expand the production capability of Pit-Product and or-
ganize a modern logistics center was reflected in the expanded investment
program for Russia that was developed throughout the year. The invest-
ment program approved by Atria Group Board of Directors in October
2006 included a new production plant and a logistics center with a total
cost of about €70 million. This was more than initially planned, but the
new plan proposed constructing both projects at one location in the Len-
ingrad Region, just outside St. Petersburg. The new production plant was
intended to produce high-margin products for the St. Petersburg market.
Its projected capacity would increase Atria’s Russian production capacity
from 80 tons per day to 170 tons per day.
The Leningrad Region was chosen as the building site for the pro-
duction-logistics complex due both to its convenient location and potential
tax breaks. According to regional laws, an investor can get a 4% break
on corporate profit tax and an exemption from the property tax (2.2%)
for the projected payback period plus two years. That added up to sav-
ings of about $600,000 per year on the profit tax for Pit-Product. The
property tax would amount about $1.1 million annually.13
In December, the general contractor for the construction of the com-
plex was selected — YIT-Lentek, a subsidiary of the Finland-based con-
struction group YIT.
PRODUCT SCOPE EXTENSION
In 2006, Atria Group had already signed a contract with OOO Neste
St. Petersburg to develop fast-food outlets at Neste filling stations under
Sibylla Concept. Sibylla is a brand owned by Atria Concept AB, which
includes food for cafes and restaurants, in particular Grill Dog, French
Dog and Burger Roll. Using patented Sibylla equipment, full meals, from
mashed potatoes with meatballs or sausages with sauce and fried onions,
can be cooked in a few minutes, right at the service station. While Atria
Group operates in all of the regions with different brands, the Swedish-
originated Sibylla brand is the only one which exists in all of the mar-
kets. In Russia, Sibylla Concept is managed as a part of Pit-Product’s
operations. The outlets are supplied primarily by Pit-Product.
In the end of 2006, fast-food sales at Neste stations reached ap-
proximately 500 servings per station (25 of 38 Neste fuel stations offered
fast food); annual sales across the chain reached 45 million rubles. The
13
Vedomosti, January 21, 2008.

31
chain operates using a modified franchising scheme: Sibylla partners rent
the equipment, implement the concept developed by Atria and import in-
gredients for preparing fast food. In early 2007, Atria signed a similar
contract with JSC Petersburg Oil Company that operates another chain of
filling stations in St. Petersburg and the Leningrad Region.
NEW PROFIT & GROWTH MODEL
In 2006, the activities of Atria Russia and Baltic business area in-
curred operating losses of €7 million, whereas this division made an op-
erating profit of €1.5 million in the previous year. For the whole group,
comparable operating profit fell to €33.5 million from €40.2 million in
2005.14
Ruohola recalled asking himself: „What were the main causes for the
decline of profitability? How can I explain the Pit-Product’s losses just a
few months after the acquisition was completed?” It was an anxious time.
Without finding out the causes of inefficiency it was difficult to build a
new model for managing the profitability and growth of the company.
Three factors were primarily responsible for these losses: a full tax
statement, the increased cost of raw materials, and ineffective product
pricing. Immediately after the acquisition, Atria switched tax report-
ing at Pit-Product to a fully official statement that negatively impacted
the company’s profitability and cash position. In early 2006, the cost of
imported pork increased by 30% due to bans imposed by the Russian
sanitary authorities on meat supplies from Argentina and Brazil. The
share of local supplies in Pit-Product’s meat purchasing was very low to
compensate for this loss. As for the prices, historically Pit-Product’s pric-
ing process was not based on material margin targets. A ‘gross pricing’
strategy was in use which reduced actual net prices by 20–25%, so the
prices did not match the high quality of some finished products.
The new Profit & Growth Model developed in the company to ensure
profitable growth of Pit-Product in the near term included two major
components: a new profit model and a new growth model. The new profit
model covered three main efforts: changing the pricing model, increasing
productivity and reducing costs. It was decided to link the prices of the
company’s products more closely to the price of materials and make the
price more dependent on the quality of a particular product. Productivity
had to be increased through new and improved production technology and
better logistics, as well as recipe optimization (recipe optimization was
14
Atria Annual Report, 2006.

32
not welcome during the first stages). Costs were to be reduced through
layoffs and getting lower prices for materials where possible.
The growth model included increasing the sales of innovative products
(in particular, resealable packaging) to up-market buyers, based on Atria’s
core competence in superior process efficiency. In 2007, Pit-Product was
the first to launch resealable cold-cut packages in Russia. Their packag-
ing and labels were recognized as the best in their category at Moscow’s
international packaging industry trade fair15
.
FURTHER DEVELOPMENT
In 2006, Atria Group faced a €2.7 million loss in Russia; in 2007,
Pit-Product succeeded in turning a profit.16
According to Atria’s man-
agement, the market share of Pit-Product in St. Petersburg increased
from 20% in 2006 to 21% in 2007. By the end of 2007, Pit-Product’s
products were distributed through over 1,500 retail outlets in St. Peters-
burg, including such retail chains as Pyatyorochka, Lenta, Dixy, Metro,
Ramstore, Seventh Continent, Quartal, Nakhodka, Perekrestok, Paterson,
Î’Êey, Auchan and others.
At the same time, Atria Group continued to strengthen its positions
in the Baltic Sea Region. It spent $100 million to acquire a controlling
interest in Sardus, the largest manufacturer of meat products and fro-
zen prepared foods in Sweden. The Group’s management was considering
the possibility that production plants in the Baltic countries and Sweden
might, in the future, specialize in producing certain products for the
Finnish retail markets, within their areas of expertise.
In 2008, a new agreement was reached with JSC Petersburg Oil Com-
pany to further promote the Sibylla fast-food concept at filling stations
(the number of stations in Petersburg Oil Company chain with fast-food
outlets increased from 18 to 30) with an investment of about €150,000.
The logistics centre in Gorelovo started its operations, which made it pos-
sible to close the three warehouses located in downtown St. Petersburg.
2009: NEW CIRCUMSTANCES, NEW CHALLENGES
It was a dark winter night in February 2009, and Juha Ruohola
was recalling all these milestones in Pit-Product’s development. He had
a Finnair ticket and was getting ready to leave Helsinki for Moscow in
order to push the integration process at Campomos, a meat-processing
15
16
Delovoy Peterburg, July 31, 2007.

33
plant in Moscow, forward. Campomos was acquired by Atria Group in
July 2008 from the Spanish Campofrio Alimentacion S.A. for € 72 mil-
lion. Established in 1989, Campomos was the first international meat-
industry company in Russia. However, the profitability of Campomos had
been poor in recent years.
It was a spirit of adventure and a genuine desire to succeed in mak-
ing Campomos profitable that led Juha Ruohola to Moscow. Since 2008,
he had been the Executive Vice President of Atria Russia. „To make
the Campomos business profitable, we have to launch a new program
searching for synergies to be achieved with Pit-Product in areas such as
purchasing, logistics, marketing and financial administration operations.
There is no reason to worry”, Ruohola reassured himself. He was sure
that Sergey Ivanchenko, recently appointed as Atria Russia General Man-
ager and General Director at both Pit-Product and Campomos, would be
able to handle the responsibility of managing the two companies.
Juha Ruohola looked at Atria’s 2008 annual report again. In 2008,
Russian operations brought 5% of the Group’s turnover. The Group’s ex-
ecutives had no doubts that Russia would be of even greater importance
in the future. The growth in overall demand for meat products in modern
consumer goods retail chains in St. Petersburg was approximately 7%. In
terms of value, food made up about 32% in citizens’ consumption. Russia
is still the world’s most significant net importer of meat; the country’s
own meat production cannot satisfy the growing demand either in terms
of quantity or quality. The share of the modern consumer goods retail
trade is growing rapidly, though the combined market share of the five
largest retail chains is approximately 12% of the Russian food market.
The consolidation of the meat processing industry is just beginning in
Russia. The biggest meat processing companies in Russia are small com-
pared to European business. There are few international meat-processing
companies. Since the acquisition of Campomos, Atria Group was in fact
the largest international player in the country.
While Atria Group’s production plants in the Baltic countries and
Sweden may, in the future, specialize in producing certain products for
the Finnish retail markets, within their areas of expertise, it was yet not
evident that such a model could be applied to the Russian subsidiaries.
„So, we were absolutely right to invite the Group’s top management,
Board of Directors and a group of managers to attend a course on Rus-
sian business practices tailored for Atria”, thought Ruohola.
The world economic decline brought a lot of problems in 2008–2009
because of the major changes in Atria’s business environment. The up-

34
ward trend in raw material prices weakened profitability dramatically in
all of Atria’s business areas. The weakening of the Russian ruble and
the Swedish krona substantially increased costs for Atria’s divisions in
Russia and Sweden. Though not so dramatic as in the non-food indus-
trial sectors, the recession had a significant impact on Atria’s sales and
profitability. General consumer demand for fast-moving consumer goods
decreased. Consumer demand shifted towards inexpensive products.
The management team of Atria Group considered the trends in the
industry development and reached the conclusion that the international
business environment depends on the following factors:
increasing global demand for food;♦
internationalization of the food industry and industrial processes;♦
internationalization of retailing and the food service industry;♦
the movement of raw materials across borders;♦
increasing pressure due to environmental and ethical issues;♦
more complex consumer behaviors;♦
operating models based on networking and♦ partnership17
.
* * *
It was a sunny early morning in the summer of 2009, when Juha
Rouhola and Sergey Ivanchenko looked jointly at Pohjola Bank report on
Atria. The conclusion of the report seemed to be optimistic enough, yet
it emphasized several challenges Atria would face in the Russian market
in the short-term. Volumes have dropped but the rise in prices has kept
the value-based growth at over 10% level18
.
The profit improved well after the first quarter of 2009. This was
the result of Atria’s cost cutting actions for its Russian operations. The
reduction of operating loss was influenced by synergy advantages in lo-
gistics, cuts in staff expenses and an increase in consumer prices. Most
of these cost savings were implemented successfully. Costs were reduced
significantly when the Campomos’s logistic center in St. Petersburg was
closed and centralized to Pit Product’s logistic center during the second
quarter19
. By the end of June, Atria had cut its Russian operations staff
by 150 workers.
17
18
Atria — Venäjä etenee hyvässä vauhdissa. Pohjola Pankki Oyj, July 31, 2009.
From: https://www.op.fi/media/liitteet?cid=151135862&srcpl=3
19
Ibid.

35
Atria Russia’s performance was weighed down by the loss-making op-
erations at Campomos. Campomos has about 1,000 employees. More than
half of Campomos’s sales are in Moscow Region, the rest — in St. Pe-
tersburg and other large cities. According to Matti Tikkakoski, the acqui-
sition of Campomos allows Atria Russia to increase its still-low market
share in Moscow. The company started to distribute its products in Mos-
cow from St. Petersburg in 2007. And yet, making Campomos profitable
was really a challenge.
Improve the profitability of Campomos and take the company out of
the red into the black appeared as Atria Russia’s central goal for 2010.
This means that the company’s position in the consumer goods retail
trade must be strengthened in Moscow and St. Petersburg and other ma-
jor cities in the European part of Russia. Other means to enhance profit-
ability include increasing cost-efficiency, reducing costs and rationalizing
primary production.
As the top-managers responsible for Atria Russia’s development,
Ruohola and Ivanchenko faced the task of increasing the co-ordination be-
tween the Group’s divisions. They knew that co-operation with the retail
chains would be tightened further. The Group has to focus on success-
fully merging the acquired companies with Atria and fully capitalizing
on synergies.
As they looked again at the Pohjola Bank report on the desk they
wondered how they could create more interest in their products. It was
clear that in the minds of the Russians, price was the most important
factor in deciding what food to buy. How could the higher quality, yet
higher priced Pit-Product and Campomos products compete with lower
priced and quality domestic producers? What would the demand for their
products be? There were many more decisions to be made, and Juha
Ruohola and Sergey Ivanchenko were counting on their knowledge of the
Russian market. There was no doubt that they were the best people for
the job.

36
Appendix 1
Atria Group — financial snapshot
2005 2006 2007 2008
2009
(half-year)
Net sales, € million 976.9 1103.3 1272.2 1356.9 648.1
EBIT, ª million 41.5 94.5 38.4 6.8
Profit before tax,
€ million
37.8 34.6 80.6 16.7 –1.1
Earnings per share, € 1.24 1.15 2.56 0.42 –0.06
Return on equity, % 10.0 8.8 17.2 2.5
Return on investment, % 10.3 8.7 15.2 5.3
Equity ratio, % 43.0 42.8 47.6 38.4
Gross investments,
€ million
107.3 89.0 284.1 152.6
R&D expenditures,
€ million
6.7 7.4 8.4 9.9
Dividend per share, € 0.42 0.46 0.70 0.20
Dividend yield, % 3.3 3.1 4.0 1.7

37
Appendix 2
Atria’s business areas: key indicators
2006 2007 2008
2009
(half-year)
Atria Finland
Net sales, € million 686.1 749.6 797.9 383.6
Operative EBIT, € million 32.2 39.7 34.4 17.8
Average personnel 2325 2394 2378
Atria Scandinavia
Operative EBIT, € million 7.4 20.5 15.4 1.9
Atria Russia
Operative EBIT, € million –2.7 4.3 –3.4 –8.9
Atria Baltic
Net sales,€ million 30.5 26.7 32.3 19.3
Operative EBIT, € million –3.4 –3.1 –3.8 –2.5

38
Appendix 3
Atria’s EBIT by region, € million
2006 2007 2008 2009å 2010e
Atria Finland 33 40 34 41 41
Atria Scandinavia 7 21 14 12 22
Atria Russia –3 4 –3 –11 1
Atria Baltic –4.9 –4.4 –3.8 –4.5 –2
Source: Pohjola Bank report.
Questions for discussion
Define the strategic characteristics of Atria Group1. ’s internation-
alisation (geographic scope; degree of foreign involvement; co-
ordination and configuration issues; selection of a foreign strategy
for Atria based on Integration-Responsiveness framework).
Undertake a strategic analysis of the situation Atria faced in2.
2005–2006, including a Russian business environment analysis,
industry and market analysis.
Evaluate the 90 Day Integration Plan of Pit-Product’s integration3.
into Atria Group and its implementation performance. What were
the main problems of the integration? How have they been over-
come? Assess the results of the five-year experience of Atria in
Russia.
Make an analysis of characteristics of Pit-Product and its envi-4.
ronment in 2008–2009 in order to define the main task problem
in the company. Identify the statement of Pit-Product’s strengths
and weaknesses, the level of appropriate competencies, etc. Take
into account branding policy and opportunities for brand exten-
sion, solutions on advertising techniques and relationships with
retailers.
Provide Atria and Pit-Product managers with recommendations on5.
how to expand their activities in the City of St. Petersburg and
other territories in Russia including proposals on competitive ad-
vantage, product portfolio, geographic scope, production facilities,
and expansion.

39
Andrei Yu. Panibratov
NOKIAN TYRES: A VARIETY
OF INVESTMENT DECISIONS FOR RUSSIA
This case study deals with the problem of choosing the right investment strategy
for Russian tyre market. Nokian Tyres achieved a high brand recognition in
the tyre market, which made it possible to create a strong premium brand in
Russia. However, competition in the market had been increasing. International
automakers were actively penetrating the Russian market. Nokian Tyres pros-
pects gradually became less deﬁnite. The company-owned plant in Northwest
Russia and a strong premium brand could no longer be regarded as a reliable
shield against the activity of other world-known tyre manufacturers. The aim
of the case study is to analyze the prospects of a large industrial company’s
strategy in a rapidly changing business environment, including the problems
connected with the management of direct investments and organization of
marketing activities. The analysis of the case is based on a comparative
analysis of pros and cons of strategies based on different levels of investment
activities and on examining the marketing perspectives of supporting a MNC’s
investment project in Russia.
INTRODUCTION
In 2004 the Finnish company Nokian Tyres made a decision to make
investments in the town of Vsevolozhsk in the Leningrad Region, near
St. Petersburg, becoming the first foreign company to establish its own
plant in Russia. At the end of 2007, the project’s investment volume was
as high as € 155 million, with plans in place to invest another € 200 mil-
lion in 2008–2011, making it one of the largest projects in the Northwest
Russia.
The author would like to thank Nokian Tyres General Manager Andrei Pan-
tioukhov and Chief of Marketing and Communications Anna Gorokhova for their
kind help and valuable comments.

40
Nokian Tyres: A Variety of Investment Decisions for Russia
In 2009, the second year of the world financial crisis, after five suc-
cessful years in the country, the sales revenues of Nokian Tyres in Rus-
sia decreased by 62% compared to the previous year. The market share
was lost due to consumers switching to less expensive brands, but Nokian
Tyres maintained its leading position in the A-segment premium tyres
market sector. Even though sales were forecasted to improve in 2010,
this growth was not expected to be quick. Due to falling demand, Nokian
Tyres was faced with the need to alter their production facilities, and
five out of six production lines in the Russian factory were running at
decreased capacity. Additionally, investments of € 15 million were made to
increase the productivity of the factory in Vsevolozhsk.
Although it was only a few days before Christmas, the same thoughts
had been troubling the General Manager of the plant, Andrei Pantioukhov
since the end of November 2009. Why were other tyre producers in no
hurry to establish their own plants in Russia and what advantages en-
abled them to successfully compete with a company that was able to pro-
duce its tyres within in Russia? What should Nokian Tyres do to prevent
its development from stalling when faced with competition from strong
and dangerous players, who are somehow able to compensate for the fact
that they have no local production facilities of their own? What are the
company’s prospects in view of growing activity of Russian tyre produc-
ers? What will the consequences of the world financial crisis be for the
company?
And, finally, what if the company’s production facilities in Rus-
sia are the notorious fifth wheel which does nothing but slow down its
growth rates in terms of profitability and competitiveness?
COMPANY BACKGROUND
An increasing number of MNCs began showing interest in develop-
ing their operations on the markets in St. Petersburg (the second largest
Russian city after Moscow) and the Leningrad Region at the beginning
of the 2000s. Despite top government officials singing its praises, the so-
called “Russian Detroit” was nothing more than part of a large-scale PR
campaign to promote the economy of the Northwest; foreign automakers
have been actively penetrating the Russian market and this process is
gathering speed.
In the mid 2000s the world’s automobile manufacturing industry was
no longer a standalone industry, capable of autonomously providing itself
with everything that a car owner might need, from intelligent driver as-
sistance systems to automotive glass and tyres, which were kept in stock

41
for new cars leaving the factory. A number of major foreign car tyre
manufacturers, having recognized the Russian automotive market’s pros-
pects for growth, invested in building their own plants and sales centres,
or in developing tyres specifically for Russian weather conditions. This is
why Russian consumers became familiar with such brands as Bridgestone,
Goodyear, Michelin, Nokian Tyres, Pirelli, etc.
Nokian Tyres was the first company to establish its own plant in
Vsevolozhsk, without waiting for the world’s leading car manufacturers
to appear in St. Petersburg and the Northwest Region and without hav-
ing any definite information about their plans concerning the Russian
market. In the middle of the 2000s when major automakers were expand-
ing their operations in Russia and built plants here, the Finnish firm
that had already established its tyre production locally had a considerable
competitive edge over other players in this field.
Nokian Tyres was the largest automobile tyre manufacturer in North-
ern Europe that produced summer and winter tyres for passenger cars
and for many kinds of heavy vehicles (buses, trucks, purpose-built ve-
hicles). The company also worked in retreading tyres for subsequent sale
in Scandinavia. Nokian Tyres owned the Vianor retail chain, which sold
tyres in Finland, Sweden, Norway, Estonia, Latvia, and Russia. In mid
2008, the company had 298 outlet stores, and 169 of them were located
in Russia. Most of the Vianor stores were entirely owned by the com-
pany, while some of them operated as franchises.
Nokian Tyres’ range of products included medium-class tyres as well
as premium-class tyres. The company’s success had come from innovation
and constant product development. According to management’s plans, new
products were going to account for no less than 25% of the company’s
annual sales.
Investment in research and development played a definitive role in
the company’s success. Nokian Tyres operated under Scandinavian weath-
er conditions and had to comply with the region’s product requirements,
which definitely had a positive effect on the brand’s high reputation.
Nokian Tyres’ core markets included the Nordic region, Russia, North
America, Eastern Europe, and Germany. Nokian Tyres had trade subsid-
iaries in Sweden, Norway, Germany, Switzerland, the Czech Republic,
Russia, and the US.
The company’s headquarters was located in the city of Nokia, Fin-
land, and was responsible for product development, marketing, and ad-
ministration. The company owned two plants — in the city of Nokia
and the town of Vsevolozhsk, Russia. The company also manufactured

42
tyres on the basis of production contracts, using the facilities of other
tyre manufacturers located in the USA, Indonesia, Slovakia, Japan, and
China.
Nokian Tyres’ net sales in mid-2008 were as high as € 561.5 million,
and the total number of employees exceeded 3,300 people.
The company’s mission was focused on both customers and climate:
“We have a natural ability to understand our clients who live in a north-
ern climate and to tap into their needs and expectations. We focus on
tyre production and services that are highly valued by our clients, living
in northern climatic conditions, with economically viable added value:
these form the foundation for our company’s earnings growth and suc-
cessful business”.
According to management, Nokian Tyres had been among the most
profitable tyre manufacturing companies in the world for several years,
as it had successfully combined growth with profitability.
HISTORY AND INTERNATIONAL EXPANSION OF THE COMPANY
Tyre manufacturing started with the production of bicycle tyres over
100 years ago, and it was only in 1931 that the decision was made to
start producing automobile tyres. In 1936, the company started manufac-
turing winter tyres branded as Hakkapeliitta, which remained the most
popular Nokian Tyres product.
In 1945 a new tyre plant rapidly increasing production volumes was
built in the city of Nokia. In the mid 2000s, the manufacturing process
at the facility was highly modern and automated. The facility produced
up to 18,000 car tyres daily.
Nokian Tyres plc was founded as a separate economic unit in 1988,
while still remaining a subsidiary of the Nokia Corporation. In 1995,
Nokian Tyres was listed on the Helsinki Stock Exchange and became an
independent company.
Nokian Tyres has been gradually undergoing a process of internation-
alization: it started by focusing on the domestic market and ultimately
became a multinational corporation. The company experienced several
stages of internationalization in the course of its development. The first
stage — expansion of its trade operations from domestic to international
markets — included export operations that started with occasional indi-
rect exports and later transformed into a retail network owned by the
company, as well as cooperation with a large number of independent im-
porters all over the world.

43
Further stages were based on more complex forms of penetration of
foreign markets, which were a manifestation the company’s desire for
more investments and greater penetration of these markets. These stages
included off-take partnerships and contract manufacturing, while further
international development of the company led to the establishment of
joint ventures and subsidiaries.
In the mid 2000s, Nokian Tyres had considerable experience in inter-
nationalization. Its first export operations began in 1926 as a result of
growth in rubber plantation production capacity, saturation of the domes-
tic market, and satisfaction of demand on the internal market. The first
export operations involved the need to delegate considerable powers to the
sellers, as well as intensive organizational work aimed at entering foreign
markets, which represented significant difficulties. Already as early as
the first stages of internationalization, the company had the opportunity
to acquire knowledge about the rubber markets in other countries, which
enabled Nokian Tyres to expand its area of operations in the future.
At the same time, the company’s volume of exports was insignificant
compared to its domestic sales, which kept growing intensively up to the
beginning of World War II. Moreover, high domestic demand prompted
the company’s management to temporarily stop its supplies to foreign
markets. In the mid-1960s export operations were renewed. At first the
foreign markets in which the company conducted its operations were
limited to the countries of Northern Europe, but later, the growth of
investments in production and innovations resulted in expansion of the
geography of their tyre sales. In 1964, the company started exporting its
products to the Soviet Union.
The growth in the number of retail outlets selling tyres made the
company think about creating its own retail network. In 2000 the Vianor
retail chain was established, which consisted of around 300 company-
owned stores by the end of 2008. The company was selling its products
in Germany, Switzerland, and the US, while trading through independent
importers in other countries.
Nokian Tyres established partnerships with other manufacturers who
were targeting the global market, which was possible to do by means of
increasing sales through product adaptation, gaining a market niche, and
simplifying the production process. Many partnerships were organized on
an off-take basis, which was, essentially, a type of manufacturing con-
tract under which the product of a particular brand was manufactured by
a different company, with standards and technology remaining the same.
Examples of such arrangements were a partnership with the Michelin tyre

44
manufacturer established in 2000, and a 2004 agreement with a Chinese
company, GITI Tyre on production of tyres under the Nordman brand,
which was later manufactured in Indonesia. Nokian Tyres was engaged in
contract manufacturing in the USA and India, and in 2003, the company
negotiated a contract with the Matador Company on the production of the
Nokian brand in Slovakia.
The company had entered into several joint ventures, thus demon-
strating that it was ready for significant investments in the internation-
alization of its operations and further penetration of foreign markets. In
2002, Nokian Tyres signed an agreement establishing a joint venture with
the Russian company Amtel Holding, with the aim of increasing sales,
product promotion, and business development in the CIS countries. How-
ever, this joint venture was short-lived, and dissolved in 2004.
In 2003 the company made its first international acquisition, in this
way obtaining more control over resources and decision-making compared
to a joint-venture company: Nokian Tyres bought a Russian retreading
plant located in St. Petersburg, called Euroban-dag. In 2004, Nokian
Tyres made the decision to start building a new tyre plant in the town
of Vsevolozhsk, Russia. From the very start, the facility was planned as
a subsidiary and was to be entirely owned by the company, which was a
radically new way of entering the market for Nokian Tyres. A massive
resource base and full control made this project highly valuable for the
company.
According to experts, the scope of the company’s international opera-
tions was determined by two groups of factors — internal and external,
which were closely interconnected. Among the most important factors in
the first group was the continuous annual increase in production and
sales (an average of 15% during 2001–2006), good profit performance,
and cost-effective economic activity. The second group of factors included
market conditions, proposals from potential partners, and a kind of the
„locomotive” effect.
Nokian Tyres’ main competitors (Groupe Michelin, Bridgestone Cor-
poration, Goodyear Tyre&Rubber Co, Continental AG, Pirelli S.p.A.) were
also international players.
In the 2000s the company declared that the company’s key strategic
aims would be determined by the following development factors:
To continue being the absolute leader on the internal market (in♦
the Nordic region) in terms of both production and sales. These
markets were the most stable and mature, accounting for a con-
siderable share of the company’s sales.

45
To continue maintaining the high quality of the core product,♦
namely, the tyres, suitable for Nordic weather conditions and se-
vere climates, since this was the segment in which the company
succeeded most of all, owing to its innovations and research. To
continuously improve the company’s line of products.
To have a strong position on the markets of Europe, the USA,♦
Russia, and the CIS. The company’s aim is to expand its influence,
thus assuring dynamic growth and making the company an impor-
tant international player.
A high rate of productivity and relationships with clients, bringing♦
large profits and giving the company a competitive advantage.
Development of the spirit of enterprise and personnel management,♦
because corporate culture ensures the successful implementation of
in-house processes and the further development of the company.
These strategic targets were regularly declared by the company,
remaining constant and important; the company allocated considerable
resources to achieving these goals, because, according to management’s
vision, this guaranteed a strong advantage over their competitors.
RUSSIAN STRATEGY
The company became interested in the Russian market quite a while
ago, and this might be the main reason why the knowledge and experi-
ence that Nokian Tyres had gained over decades enabled the company to
succeed and create a special competitive advantage over other tyre manu-
facturers.
Development of the market
Nokian Tyres started exporting its products into the Soviet Union
as early as 1964, and it was the first Western tyre producer introduced
in the Soviet Union. Trade in tyres was organized within the framework
of Finnish-Soviet bilateral clearing trade, and several generations of car
owners had already been using these tyres in the Soviet era. Neverthe-
less, these operations were not systematic and did not play much of a
role in the company’s internationalization. Thus, the scope of the compa-
ny’s activity in Russia had remained practically unchanged until the end
of the twentieth century. At the end of the 1990s, the company started
regarding the Russian market as strategically important, and, as a re-
sult, made the decision to increase the scale of its operations in Russia.
Market research, together with actively expanding activities on the target
market enabled the company to become one of the leading tyre manufac-
turers in Russia.

46
At first, the company cooperated with independent importers, and had
no dealer network in Russia. In the 1990s, Nokian Tyres became a share-
holder in Sibur (a Russian tyre producer). However, after the company,
made the decision to create its own chain or retail outlets called Vianor
in the countries of Northern and Eastern Europe in 2000, Nokian Tyres
started opening its retail outlets in Russia. The first store was opened
in Moscow in 2001, and in 2008, the company had 169 Vianor stores in
Russia, with part of them entirely belonging to Nokian Tyres, and others
operating as franchisees. One year later, in autumn 2009, there were 325
Vianor stores in Russia and the CIS (Exhibit 1).
Source: Nokian Tyres own data.
Exhibit 1. Vianor outlets in Russia and the CIS as of September 30, 2009
First Investments
Exports into Russia (mainly sales of tyres for cars and trucks in the
premium and medium price segments) occupied an important place in the
company’s activities and accounted for about 10% of its sales. Neverthe-
less, the company soon decided to establish a joint-venture company in
Russia in order to produce tyres under the Nokian Tyres brand and orga-
nize its sales throughout the CIS. In 2002, the company signed an agree-
ment with a Russian holding called Amtel (currently Amtel-Vredestein).
The joint-venture company was established on the basis of Amtel’s facil-

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