Avtomir Group

St. Petersburg State University

Graduate School of Management

Mid-term essay.

Analysis of the Russian retail industry and companies’ motives for internalization.

Simonov Anatoli

Yulia Sokolkina

Ekaterina Sirunina

St. Petersburg

2013

Introduction

Russian retail market today - this is a rapidly developing area which is of interest of many investors.

In this case, the domestic retail market has distinctive features of the European market, which has a strong positioning of the high-price segment, compared with the high and low price ranges. Also, Russia has not yet achieved the European level of price and quality, which affects primarily on business performance, but increased competition, coupled with growing consumer awareness and promote the gradual solution of the problem.

Among the major trends in retail, experts mention the expansion of major players to regional territories, absorption and joining smaller networks, and the use of tools of franchising. Russia, for example in terms of franchising is one of the leaders on this score - the average share of the franchise in the retail market is growing to 20%. The experience of foreign colleagues is quite an effective way to improve the effectiveness of sales and retail culture in general.

It should be noted that in case of entrance of federal players to regional retail markets, there is a risk of imbalance between the providers, owners of certain brands of goods and their distribution and dealer companies. And more often the incoming competitors violate the existing conditions; manufacturers are creating new brands for networks specially adapted to their format.

Also, there is now a trend assortment formation based on consumer demand, which every year becomes more discerning, forcing retailers to review their competitive advantage, focus more on the service and the quality of services at the same time reducing the cost of goods.

It is also worth to mention, that there is no trend of internationalization exist. Most of the Russian retailers are nationally oriented and don’t meet significant support from the government. During the period of crisis some Russian companies were listed by government as firms that deserve support in case of emergency in the market.

There you will also see a few examples of successful enter to the Russian market of European and American retailers that hold dominating and strong positions in some of segments of the retailing industry.

X5

X5 Share Capital as of 31 December 2012: Alfa Group - 47.86%, Founders of Pyaterochka - 19.85%, X5 Directors - 0.13%, Treasury shares - 0.11%, Free float - 32.05%, The Company’s shares are listed on the London Stock Exchange in the form of Global Depositary Receipts (GDRs) (LSE ticker: FIVE). Each GDR represents an interest of 0.25 of one ordinary share.

Country	Ukraine, Kazakhstan
Year of entry	2003, 2004
Industry/ business area	Retail
Entry mode	Greenfield and brownfield strategies. One of the representatives of the X5, Perekrestor, acquired SPAR chain in Ukraine in 2003 in order to rebrand all the existing stores in there. In 2004 Pyaterochka enters Ukrainian and Kazakh markets using the franchising strategy.
Motives	Expansion and gaining of profits. These two markets are more or less identic to the core market of this company in terms of the existing business area.
Firm specific advantagesused on the foreign market	Company does not have any specific advantages, and pays attention primarily to the Russian market and two CIS markets, as they were evaluated as identic and appropriate for the further development.
First mover or follower	Company entered new markets and acted as a first mover, in comparison to Russian competitors.
Type of state involvementin the process of internationalization	State was not involved into the process of internationalization of this company, as it does not fit its interests, and this process is ruled only by company’s ambitions.
Evaluationof the success of the internationalization	Two brands that are presented in the foreign markets have pretty stable positions.

Magnit

X5 Share Capital as of March 2011: Sergey Galitsky - 46.43% (41.10% directly, 5.33% after Lavreno Ltd), Vladimir Gordeychuk - 2.92% (direct), Alexey Bogachev - 2.6% (after Labini Investments Ltd), Free float - 47.37%. Company is presented at LSE and MICEX-RTS.

In late December 2008, the network of "Magnet" was included in the list of companies that are entitled to get state support during the crisis.

Country	Russia
Year of entry
Industry/ business area	Retail
Entry mode	It is wholly owned Russian company, which operates in the national market.
Motives	Firm is not presented in foreign markets.
Firm specific advantagesused on the foreign market	NOT PRESENTED
First mover or follower	NOT PRESENTED
Type of state involvementin the process of internationalization	In late December 2008, the network of "Magnet" was included in the list of companies that are entitled to get state support during the crisis. This company is the Russian retail market leader by the number of stores, that is why it presented an interest for the state, as one of the essential retailers.
Evaluationof the success of the internationalization	NOT PRESENTED

Auchan

Auchan SA is controlled by the Mulliez family, one of the wealthiest in France.

Country	Auchan has branches in France, and internationally in Italy, India, Spain, Portugal, Luxembourg, Poland, Hungary, Russia, China, Taiwan, Romania and Ukraine.
Year of entry	Italy -1989, India - 2012, Spain - 1981, Portugal - 1996, Luxembourg - 1996, Poland – 1996, Hungary - 1998, Russia - 2002, China - 1999, Taiwan - 2001, Romania - 2006, Ukraine - 2008.
Industry/ business area	Retail, real estate
Entry mode	It is wholly owned French company that follows greenfield and brownfield strategies. Company invests directly to the new markets and operates under two brands, as Auchan overtook most of the Real hypermarkets from Poland, Romania, Ukraine, and Russia for 1,1 bln. Euro. Company opens subsidiaries in new markets. Some stores operate in terms of franchising contracts.
Motives	Expansion and gaining of profits. Entering markets that are attractable in terms of consumption and environment of the existing business areas.
Firm specific advantagesused on the foreign market	Company has a huge experience of entering new markets. All the decisions are provided with a particular and detailed analysis.
First mover or follower	Usually company enters concentrated markets. It had a few fails in the past. As a French company in some markets it cold be described as a first mover, but in terms of the whole markets, it operates in, firm is a follower.
Type of state involvementin the process of internationalization	State was not involved into the process of internationalization of this company, as it does not fit its interests, and this process is ruled only by company’s ambitions.
Evaluationof the success of the internationalization	Company failed in a few markets, but currently it is one of the world's principal distribution groups with a presence in 12 countries and 269,000 employees.

Rolf Group

The company is owned by Cyprus trusts. Mr. Sergey Petrov left the Company as its Manager and Shareholder in 2007 and completely transferred the ownership to Cyprus trusts.

The Group consists of several business directions:

· ROLF Retail (ROLF dealerships), ROLF Finance & BlueFish (used cars sales);

· ROLF Distribution of Mitsubishi (ROLF Import);

· ROLF SCS (ROLF Logistic);

· Spare parts distribution (We Love Parts).

Country	Russia
Year of entry
Industry/ business area	Retail, logistics
Entry mode	It is wholly owned by Cyprus trusts Russian company, which operates in the national market. Has a few subsidiaries which were established as joint ventures.
Motives	Firm is not presented in foreign markets.
Firm specific advantagesused on the foreign market	NOT PRESENTED
First mover or follower	NOT PRESENTED
Type of state involvementin the process of internationalization	State was not involved into the process of internationalization of this company, as it does not fit its interests, and this process is ruled only by company’s and partners’ ambitions.
Evaluationof the success of the internationalization	NOT PRESENTED

M.Video

Beneficiaries of the company (September 2012): President Alexander Tynkovan, board member Michael Tynkovan, CEO Paul Breev. Part of the shares is in free float (RTS: MVID, MICEX: MVID).

In early November 2007, the IPO was made in which shares were sold for $ 364.875 million. Retailer’s capitalization reached $ 1.25 billion.

Country	Russia
Year of entry
Industry/ business area	Retail
Entry mode	It is wholly owned Russian company, which operates in the national market.
Motives	Firm is not presented in foreign markets.
Firm specific advantagesused on the foreign market	NOT PRESENTED
First mover or follower	NOT PRESENTED
Type of state involvementin the process of internationalization	State was not involved into the process of internationalization of this company and is not supposed to, as it does not fit its interests, and this process can only be caused by company’s and partners’ ambitions.
Evaluationof the success of the internationalization	NOT PRESENTED

DIXI Group

State influence:

1. Ownership type: The Mercury Group of Companies, a diversified holding company, owns a controlling stake in OJSC DIXY Group. The Mercury Group core assets are as follows:

a. Megapolis Group of Companies, Russia's largest distributor of FMCG products and one of the world's largest distributors of tobacco products;

b. SovInterAutoService, one of the largest trucking companies in the CIS backed by more than 30 years of truck transport within Russia in Western and Eastern Europe and Asia;

c. The Mercury Development group of companies, known for projects such as construction of class A+ multipurpose Mercury City Tower at Moscow City development and M.V.Frunze Resort in Sochi, and others;

d. JSC Gorevsky GOK, Russia's largest polymetal (lead, zinc) producer and smelter;

e. Turboholod Manufacturing Facility (a developer of turboexpanders for the oil and gas industry);

f. The Degtyarev Plant (a manufacturer of civilian and military equipment).

2. Participation in state-organized contracts and projects: no major projects or contracts

3. State representation in the firm through board membership: no state representation in DIXY BOD

4. Financial and tax support: more often legal barriers are created and state regulations refer to retail operations as business activities of the company are connected with commonly used and regulated consumer goods, therefore, state authorities monitor the company operations, proper licensing agreement fulfillment, conditions of storage of the goods and their sale, etc.. For instance, there was a case when Rosalkogolregulirovanie intended to cancel alcohol licenses of the wholesaler DIXY-Petersburg when alcohol with counterfeited stamps was found in the company warehouse.[1] During crisis Victoria Group was provided with governmental financial support. However, it was not very efficient and helpful to the supermarket chain.[2]

Internationalization:

Country	The company is present only domestically in Russia, in Moscow, St.Petersburg and Central[3], North West[4] and Urals[5] districts. The total quantity of stores is 1489 within Russia. It started operating in 1999 in Moscow (DIXI) and Yekaterinburg (Megamart), expanded in 2000 to St.Petersburg (DIXY).
Year of entry	-
Industry/ business area	One the of Russian leading retailers of food and everyday products (accounts for more than half of retail market for food and everyday products in RF)[6]; It serves the mass consumer in soft discount format; Brands of the Group are the following: DIXI, Victoria (supermarket and quartal), Minimart, Megamart, Deshevo, Cash; Over 37 000 employees; Store formats include: · neighborhood store (95%[7]); · economic supermarket (0,7%); · compact hypermarket (1,3%); · supermarket (2,1%); · discount store (0,7%); · hypermarket «cash&carry» (0,1%).
Entry mode	-
Motives (potential motives for future perspectives)	It is expanding rapidly but only domestically (to various regions); it is enjoying benefits of diversification of formats of stores within Russia.
Firm specific advantagesused on the foreign market (that are currently used during expansion to new markets domestically and can be potentially used in internationalization)	· Customization of assortment and quantity of goods for each store to consumer demand; · Collaboration with local manufacturers and vendors (prompt and efficient supply with fresh local goods); · Efficient logistics and distribution system (8 own distribution centers, fleet of trucks); · Cutting edge IT (the Aldata GOLD supply chain management system[8]); · High quality private labels.
First mover or follower	-
Type of state involvementin the process of internationalization	No internalization yet
Evaluationof the success of the internationalization	No internalization yet

In March 2011 DIXI Group acquired 100% of shares of Victoria Group, another retail chain; one of the vendors of this transaction was Victoria Alliance Limited formally registered in Cyprus. Federal Antimonopoly Service approved this transaction.[9] Another international interaction could refer to debt financing that the company attracts, for example DIXY Group signed an agreement with UniCredit Group and other Russian banks (Rosbank, Gazprombank, Bank VTB, etc.) to attract bank financing in the amount of 547,3 mln. USD (to refinance current debt of the company and for operating purposes).[10]

Lenta

State influence:

1. Ownership type: The parent company Lenta Ltd. is registered at British Virgin Islands. The VTB Group, specifically investment arms VTB Capital and TPG Capital, owns 30,8% of shares (where the major shareholder (over 75% of shares) is the state, namely the Federal Agency for State Property Management (Rosimushchestvo)), individual investor August Meyer owns 41,02%, the European Bank of Reconstruction and Development (EBRD) owns 11,1%, and the rest is distributed among minority shareholders.

2. Participation in state-organized contracts and projects – no major contracts and projects

3. State representation in the firm through board membership – the parent company is LLC; the VTB Group (thus the state authority indirectly) is participating in strategic decisions of the company.

4. Financial and tax support: during the crisis in 2008 the company was promised to obtain governmental financial support in order to stimulate its operations activities.[11] Moreover, state authorities monitor the company operations, proper licensing agreement fulfillment, conditions of storage of the goods and their sale, etc., so state regulations are necessary in this process.

Internationalization:

Country	The company is operating domestically in Russia, namely in Central, North West, Siberia-Ural and South Volga districts[12]; it started operations in 1993 in St.Petersburg.[13]
Year of entry	-
Industry/ business area	one of the largest and fast-growing retail chains in Russia; Product offer at least by 5% lower prices than mid-market ones (5 mln. regular customers); 17 500 employees; Formats of the company include: · classical retail large-format (hypermarket), · wholesale (Cash&Carry), · discounter.
Entry mode	-
Motives (potential motives for future perspectives)	The chain is growing rather fast but yet internally within Russia: it is actively developing its operations in various cities of the country.
Firm specific advantagesused on the foreign market (that are currently used during expansion to new markets domestically and can be potentially used in internationalization)	· A tailor made project, i.e. project that is “made-to-measure”, «developed for individual needs», specifically for the Russian retail market; · Reduction of warehousing costs (placement of a part of inventory directly in sales area); Advanced product distribution technologies; · The shortest route products delivery to customers and the lowest price; · First mover at the Russian market (a Russian pioneer in creating wholesaling and retailing culture; realization of the concept of one-stop shopping – provision of goods and additional services, e.g. photo services, drug stores, cafes, etc.); · Fast execution of invoices and certificates for all types of goods (for wholesale purchases).
First mover or follower	-
Type of state involvementin the process of internationalization	No internalization yet
Evaluationof the success of the internationalization	No internalization yet

8. O’KEY

State influence:

1. Ownership type: Dmitry Korzhaev and Dmitry Troitskii (own 56,64% of shares, 28% each, through the company Nisemax Co Ltd), Boris Volchek (7,28% through Bytenem Co Ltd), Estonian businessman Hillar Teder (23,02% through GSU Ltd), another 15,06% of shares (after IPO in 2010) are traded at LSE[14].

2. Participation in state-organized contracts and projects – no major state-organized contracts and projects

3. State representation in the firm through board membership – no state representation in BOD

4. Financial and tax support: state authorities monitor the company operations, proper licensing agreement fulfillment, conditions of storage of the goods and their sale, etc., so state regulations are necessary in this process.

Internationalization:

Country	The company is operating domestically: it is one of the leading Russian retailers, operating 83 stores in Russia’s 20 largest cities in the North West, South, Central, Urals and Siberian districts; The Company opened its first hypermarket in St. Petersburg in 2001; In 2007 it entered the Ukrainian market but in 2009 closed its four hypermarkets in one day.
Year of entry	2007 – the Ukrainian market entrance 2010 – start of bankruptcy procedure of O’KEY Ukraine hypermarkets (95% of which belonged Expert Capital SA (Luxemburg) that belonged to Hillar Teder and 5% belonged individually to Hillar Teder: in 2009 all 4 hypermarkets were closed because they were insolvent and couldn’t proceed operations. In 2008 there were substantial problems with the company ability to pay to suppliers. The whole story is rather questionable and still not finished as the final list of creditors of the bankrupted company was officially approved in November 2011.[15]
Industry/ business area	A fast growing retail chain in Russia, one of Europe’s largest retail food markets; Primarily focuses on the modern Western European hypermarket format under the O’KEY brand, complemented by O’KEY-Express supermarkets; In 2012 the company was planning to diversify its business activities with discounter chain «Da!»[16], however, no updated information was found whether the investment phase will be finished on time; over 19 000 highly qualified employees
Entry mode	Hiring of new management with international experience in 2007, including the current CEO Patrick Longuet (former Auchan employee for 27 years), Executive Director and Marketing and Sales Director; now each member of O’KEY Group’s management team has international experience and deep knowledge and understanding of the Russian food retail market. As for the story of failure internalization in Ukraine, the company entered in 2007 with a wholly owned subsidiary, controlled by Hillar Teder.
Motives (potential motives for future perspectives)	The retail chain is growing fast within Russia, therefore, it had financial opportunities to diversify geographically, which in reality turned out to be failure in really harsh times of the crisis in 2008.
Firm specific advantagesused on the foreign market	· A wide range of products (large assortment of fresh products) at competitive prices and in convenient locations (near key traffic intersections, within easy access to public transportation and/or within highly populated residential districts); · High quality of service, convenient layouts (for example, low shelving for ease of reach and well-lit aisles); · A modern shopping environment with an appealing ambiance without a “warehouse” feel; · A family friendly environment with supervised in-store play areas for children; · A large number of cash registers to reduce queues.
First mover or follower	It was the follower in Ukraine in 2007 when the market was already competitive (e.g. Auchan that purchased three bankrupted O’KEY hypermarkets was already at the market for 2 years).
Type of state involvementin the process of internationalization	No or insignificant involvement in the company internalization due to the highly competitive market.
Evaluationof the success of the internationalization	The process of internationalization was a failure because in harsh period of the crisis the company wasn’t able to secure its existence.

The company conducted IPO on London Stock Exchange (LSE).[17] The story of failure internalization of hypermarkets O’KEY Ukraine is still going on (see above).

Eldorado

State influence:

1. Ownership type: Eldorado Ltd. is fully controlled by PPF Group[18] (100%), one of the largest investment groups in Central and Eastern Europe (Czech Republic; 17.6 billion Euros of the Group assets (June 30, 2012)). The main activities of the Group are banking, insurance, real estate, energy and mining. PPF Group is represented in Central and Eastern Europe, Russia and Asia.[19] The transaction occurred in December 2010 because of Eldorado debt to PPF Group (after substantial tax claims, see below).

2. Participation in state-organized contracts and projects – no major state-organized contracts and projects

3. State representation in the firm through board membership – no state representation in the company BOD

4. Financial and tax support: state authorities monitor the company operations, proper licensing agreement fulfillment, conditions of storage of the goods and their sale, etc., so state regulations are necessary in this process. For instance, Eldorado was convicted guilty in tax evasion by the Federal tax authority during the crisis in 2008 (tax claims of almost 15 bln. RUR for 2004-2005) when creditors required immediate repayment of debts and suppliers stopped deliveries.[20]

Internationalization:

Country	The company is operating domestically: Eldorado stores are open in all Russian cities with population of 500 thousand residents and in over 90% of cities with population of 250-500 thousand; it was founded in 1994 in Samara.[21]
Year of entry	-
Industry/ business area	The company is within top five retailers of consumer electronics in Europe and top 10 retailers in the world (700 stores); Electronics of the private label Elenberg (about 10% of sales) are produced in China and Turkey and then assembled in Kaliningrad; «HiTechnic» is Eldorado service direction (Russia's largest professional services company: installation, connection, setting and repair of household appliances and electronics); Specially equipped HiTouch show rooms of premium segment innovative and exclusive goods; The company acquired the chain of consumer electronics Beringov (28 stores in 27 cities in the Central district) in 2012; In 2005-2009 Eldorado developed the chain of cellular shops but they were sold to MTS due to financial complications; Over 15 000 employees.
Entry mode	-
Motives (potential motives for future perspectives)	The company is rapidly growing and has the potential to diversify geographically; moreover, the company ownership by the foreign investor allows to enter international markets; another question concerns whether the same brand should be used abroad.
Firm specific advantagesused on the foreign market	· Wide assortment of high quality electronics (over 20 000 items) of leading international brands; · Strategic partnerships with leading international electronics producers (Bosch, Philips, Samsung, Sony, Panasonic, LG, HP, Nokia, etc.); · Loyalty consumer programs (over 6 mln. participants); · Strong marketing campaigns, intensive repositioning activities. · Innovative format of new hypermarkets: design, goods display, WOW- and Live zones.
First mover or follower	Follower in import activities
Type of state involvementin the process of internationalization	No significant involvement of the state due to the competitive industry and the governmental regulatory function
Evaluationof the success of the internationalization	Successful import of leading international brands of electronics, except for the occasion when the company was convicted to use fictitious distributors in order to increase import tariffs (significant threat).

Svyaznoy

State influence:

1. Ownership type: 99,99 % of the company belongs to Svyaznoy N.V.[22] (Netherlands) whose main owner is Trellas Enterprises Limited (82 % of the company belongs to President of Svyaznoy Maxim Nogotkov). It was created in 2011 in order to conduct more transparent and responsible decision making within the company, namely the Supervisory Board was created to enhance the corporate governance system: it consists of five people, including three independent directors: Andy Dewhurst, Mickael Cutt and Jim Weight, and the main shareholder Maxim Nogotkov and Yuri Vinokurov, advisor of the general director of MNP Group (Moscow office) and vice-president of CJSC UK Sotsinvestgarant.[23] Management Board includes CEO of Svyaznoy Group Dennis Ludkovsky and Sebastian Pijnenburg.

2. Participation in state-organized contracts and projects – no major state-organized contracts and projects

3. State representation in the firm through board membership – no state representation in the company BOD[24]

4. Financial and tax support: state authorities monitor the company operations, proper licensing agreement fulfillment, conditions of sale, etc., so state regulations are necessary in this process. The company also faced significant tax claims of 2,5 bln. RUR in 2007 and was convicted to have overstated prices and avoid VAT payments.

Internationalization:

Country	The company is operating domestically in Russia and in Belarus in 3 401 shops. Belarus has similar cultural aspects, the Russian strategy can be easily applied there (no need for specific adaptations). Now the number of stores in Belarus is 79 in 24 cities[25]
Year of entry	In 2007 the company acquired 102 shops in Belarus.
Industry/ business area	It is the retail chain of consumer electronics and services (communication, portable digital audio- and photo-devices), mobile operator contracts, accessories; the official distributor of the leading manufacturers of GSM- and DECT-phones, as well as dealer of the largest mobile operators under Svyaznoy and Svyaznoy 3 (extended digital technology gallery) brands; consumer electronics can be bought via Internet shop and call center; In 2010 the company started to provide financial services in Svyaznoy Bank in strategic partnership with Promtorgbank[26]; Additional businesses are Svyaznoy Zagruzka, the content provider, and Svyaznoy Travel, online-service providing all core services related to travelling.
Entry mode	Full acquisition of 102 existing shops in Belarus – the chain of cellular shops MegaPlus and photo services Fokus (about 2,3% of the company business[27]) – brownfield strategy
Motives	Geographical expansion and diversification of the company businesses; it was part of the overall strategy to diversify and provide more devices than only cell phones and connected services
Firm specific advantagesused on the foreign market	· Direct partnerships with electronics suppliers (Siemens, Motorola, Philips, Ericsson, etc.); · Consumer loyalty programs Svyaznoy-Club (over 16 mln. participants)[28]; · Open display of electronics in digital galleries Svyaznoy 3.
First mover or follower	The company surely was a follower at the competitive Belarusian market of cellular shops and photo services.
Type of state involvementin the process of internationalization	No or insignificant state involvement in internalization because of high competition at the market.
Evaluationof the success of the internationalization	This is a rather successful example of internationalization.

Avtomir Group

State influence: In 2007 Avtomir Group started its partnership with the largest Russian state bank – Sberbank. In 2011 the credit portfolio of the company was enhanced by the increase of the Sberbank share in Avtomir Group up to 23, 8% compared to 8,3% in 2010. During the period 2007-2011 almost all credits of the company denominated in foreign currency were transferred into Russian ones.

Internationalization:

Country	Kazakhstan
Year of entry
Industry/ business area	Car retail
Entry mode	Export. Two dealer centers were opened in Astana and Karaganda almost at the same time.
Motives	The strategic goal of the company at the end of 2007 was to build a strong federal commercial network and to develop the business. High saturation level of the Moscow’s car retail market made Avtomir Group chose expansion to the regions to be one of the prioritized directions of the company. Car market of Kazakhstan had a great potential at that time. Analysts said that Kazakhstan customers had a positive attitude towards Russian brands, which were associated with stability. The increasing demand for cars in Kazakhstan was also a crucial factor which influenced the decision to enter this particular market.
Firm specific advantagesused on the foreign market	Avtomir is the number one Russian car retailer in terms of variety of cars brands, which allows to the company to react quickly on any changes in consumer demand. It has a strong brand, recognition of customers, good reputation. Its aim in 2007 was to modernize the service the company provides to its customers, so Avtomir Group enlarged the service package. Furthermore, Avtomir Group’s product portfolio fit the consumers demand for middle class cars.
First mover or follower	The specific feature of the car retail market is the fact that car producers arrange tenders for obtaining the dealership of particular brand. Moreover, they provide territorial inviolability for their dealers, which means that different dealers don’t sell the same car brand in the same geographic area. Moreover, car producers have a control over retail prices and they defend retailers from “price wars”. Compare to other Russian companies operating in the same country and the same business area.
Type of state involvementin the process of internationalization	There was no direct state participation in the internationalization process. The partnership with Sberbank started in 2007 was a good back up for a company during the process of internationalization, since it become possible for a company to rely on the state bank in case of credit issues.
Evaluationof the success of the internationalization	Expansion of the business to Kazakhstan was a beneficial strategic step of Avtomir Group due to several reasons. Firstly, car sales in Kazakhstan are constantly growing. The amount of cars sold in 2010 and 2011 increased by 14% and 31% respectively in comparison to the previous years.[29] Secondly, the most popular brand amoung Kazakhstan consumers was LADA (40% of total sales), which emphasizes the consumers demand for budget cars. Thirdly, automobiles from Russia were the most preferable ones among consumers in 2011. The percentage of cars brought from Russia which were sold in Kazakhstan in 2011 was about 54%. Finally, the analysis of the regional sales structure of the company revealed that the fastest growth of sales in 2011 occurred in Kazakhstan (the increment was about 119,6%).[30]

Evroset

State influence: Negative influence of Belarusian state requirements were noticed.

Internationalization: Currently Euroset manage more than 5000 outlets in Russia and in Belarus.

Country	Belarus
Year of entry
Industry/ business area	Mobile phone retailer
Entry mode	Export. Outlets’ opening.
Motives	Promising market (in 2006 the subscriber base of Belarus increased several times). Growing demand, no competition.
Firm specific advantagesused on the foreign market	Flexiblity of the company, which allowed to Euroset to rapidly advanced to a leading position in the market. High quality after-sales service, low prices.
First mover or follower	The company was the first mover. Wireless equipment retail market in Belarus didn’t have any serious competitors at the time Euroset appeared there.
Type of state involvementin the process of internationalization	Euroset faced the strict state requirements when it entered the market of Belarus. All mobile phones sold via the Euroset network were imported to Belarus legally in strict conformity with the Belarusian legislation. Time-consuming certification procedures in Belarus were also quite difficult for the company.[31]
Evaluationof the success of the internationalization	Successful due to the profitability and business development in Belarus.

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