Success of Russian Multinational Corporations - Essay Example

Success of Russian Multinational Corporations (MNCs) The resource-based Russian MNCs succeeded in the internalisation strategy through export of product followed by the acquisition of foreign assets and the later establishment of subsidiaries due to three reasons explained below. Most SOE had a network of subsidiaries in many parts of the Soviet Union referred to as union enterprises owing to the operational by the Soviet Ministry of Central Planning (Filippov, 6). Suppliers and customers were chosen by the government; therefore, MNCs located in Moscow easily exported to these Soviet Republics before the split.

However, the disintegration of the Soviet Union led to the loss of the supplier and customer links owing to the establishment of tariff and non-tariff barriers with the effect of the purchase of subsidiaries by the MNCs in these CIS countries. The organisation of the Soviet Union explains why the Russian MNCs adopted the export strategy before the establishment of subsidiaries. The other reason for Russian MNCs choice of internalisation strategy was seeking markets for their products and a gaining a good understanding of the market before committing more resources in the form of purchase of subsidiaries.

Russian MNCs had to have a feel of the market in terms of profitability and market conditions through export of products, the success in these goals allowed for further investment in terms of purchase of assets and set up of subsidiaries. The need to reveal shareholder structure and ensure transparency in operations affected the ability of Russian MNCs to set up new subsidiaries early in the internalisation strategy owing to the effects of “cowboy capitalism” (Filippov, 7). However, a better understanding of the market after exports and success in the market allowed the MNCs to purchase subsidiaries.

The other reason for the choice of the above-mentioned internalisation strategy was the need to exploit efficiency through seeking channels for economies of scale in production. Producing locally for a large market and supplying through exports was the initial manner in which the Russian MNCs achieved this goal. Understanding the global market and gaining access to resources in the host countries allowing for cheaper production resulted in the acquisition of assets and the subsequent set up of subsidiaries in these markets.

Work Cited Filippov, Sergey. Russias̕ Emerging Multinationals: Trends and Issues. Maastricht: UNU-MERIT, Maastricht Economic and Social Research and Training Centre on Innovation and Technology, 2008. Internet Resource.