Oriflame Cosmetics

Oriflame is a public company, which was founded by Roberts and Jonas Jochnick in 1967.

Internationalization:

Country	Russia
Year of entry
Industry/ business area	Beauty products retailer
Entry mode	1992 – first offers of Oriflame products in Russia.[58] 1996 – start of direct sales to Russia and of implementation of multilevel marketing plan. 2004 – start of the first wholesale store construction. February 2010 – purchase of land 40 km from Moscow where logistic and production center will be located (greenfield FDI). The costruction will be finished in 2013 and this Oriflaime lant would be the largest in the world. The amount of investments is about €125-175 mln.[59]
Motives	High potential of the Russian market, increasing interest in cosmetic products and in opportunities to get the additional income. No competitors. Positive response on the products in 1992 before the official start of direct sales.
Firm specific advantagesused on the foreign market	Natural cosmetics, opportunities to build a career, direct sales (individual approach to customers)
First mover or follower	The company was the first mover. Its main competitor Avon entered the market few years later. Avon and Oriflame have similar product ranges, however, they have different values and different network marketing schemes. Avon is mainly focused on the clients (brochures, discounts, but personal sales only), whereas Oriflame focuses on both clients and distributors (brochures, special offers and unlimited earnings from sponsorships)[60].
Type of state involvementin the process of internationalization	Oriflame has a potitive image in Russia. In 2009 Oriflame became a laureate of the international award of the State Duma Committee on Economic Policy and Entrepreneurship.[61] Despite the fact that state doesn’t involved directly into the process of internationalization, the positive attitude towards Oriflame helped the company to purchase a piece of land in the ecological zone 40km from Moscow in 2010.
Evaluationof the success of the internationalization	Oriflame is an example of extremely successful internationalization in Russia. There was a rapid growth of the company’s sales. During the years of its presence in Russia the company managed to open two plants in the form of Greenfield FDI’s.

Azbuka vkusa

Azbuka vkusa is a private retail chain opened in Moscow in 1997.

Internationalization: Company is not internationalized. However, Azbuka vkusa, the premium product retailer. has several competitive advantages, which build its potential for geographical expansion in Russia and in abroad in the future. The company plans to open its first outlets in Kiev soon. In 2007 Azbuka vkusa tried to do so, but denied the idea because of financial criris.

Country	Ukraine
Year of entry	2013 (probably)
Industry/ business area	Food retailer
Entry mode	Company plans to open outlets in Kiev.
Motives	Business development of the company, potential of the Ukrainian market
Firm specific advantages	Focus on quality of products, atmosphere in the shops and time consumers have to spend in the shop, not on the discounts; the same structure of all supermarkets to make the shopping process more convenient; product division on several price categories (premium (e.g. fruits from Japan), middle, low); eco-products[62]
First mover or follower	There are several premium retailers which already exist in the Ukrainian market “Furshet Gurman”, “BK Select”, “Kosmos” “Spar Gourmet”. [63]
Type of state involvementin the process of internationalization	No, but the Regional program of development allowed to company to enhance its position in the Russian market till 2010, which allows to Azbuka vkusa now to expand abroad.
Evaluationof the success of the internationalization	There is no internationalization yet.

OBI

Internationalization: OBI is German DIY (do-it-yourself) retail which was founded in 1970. It is privately owned by the Tengelmann Group. The internationalization map of the company is quite large. OBI supermarkets exist in 13 countries nowadays.

Country	Russia
Year of entry
Industry/ business area	DIY retai
Entry mode	Franchising. Company has its own franchising center in Moscow[64], which operates as a subsidiary of Tengelmann Group. OBI Franchise Center (OBI Franchise) is a retailer of home improvement products, based in Russia. It operates a chain of hypermarkets offering home building, repairing, finishing and gardening products.[65]
Motives	Market saturation of mature markets made the company move towards emerging Russian market, which had a huge potential, no competitors and high demand (many Russians have their own country-house “dacha”)
Firm specific advantagesused on the foreign market	OBI was the first supermarket where customers could find all necessary goods for repair and gardening works. Before the opening of OBI Russian customers had to buy these goods in different smaller shops.
First mover or follower	OBI was the first DIY retail chain which came to the market. The grand opening of two supermarkets in Moscow in 2003 was extremely impressive. Being the first mover, OBI managed to attract big customer audience to the shops.
Type of state involvementin the process of internationalization	There was not significant state involvement due to the potential growth of competition.
Evaluationof the success of the internationalization	The internationalization of the company in Russia was extremely successful. The percentage of OBI’s sales in Russia is much higher than in the other countries.

Genser

State influence: Genser is a private Russian car retail company. Heirs of Igor Ponomarev and Vladimir Pronin own 51% of company’s shares. 28% is under control of the investment fund Volga River, 21 % of shares belong to the fund Solway Investment. In 2009 Genser attracted investments from Solway Investment, Russian private equity investment fund, located in Cyprus and specializing in international strategic investments. This step was done due to the significant decrease of car sales and lack of bank’s support in the debt conversion. [66]

Internationalization: In 2005 Genset group started to realize its regional program aimed at creation of the commercial network in different Russian cities. Nowadays Genser’s outlets exist in 5 Russian cities.[67] Genser doesn’t have any plans for expansion abroad.

Genser has a strong development potential. The company offers to its customers variety of cars in all price segments. The main competitive advantages of the company are: unique service base, highly-qualified personnel, who have trainings in specialized car producers’ centers, high technical level of all company’s outlets.

Amway

State influence: Amway is a private company founded in 1950s by Jay Van Andel and Rich DeVos.

Internationalization: Amway measures its success in a country not only with the amount of sales and profitability, but also with degree of its involvement in charity programs. Amway Russia is one of the largest corporate donors in Russia. Current Amway’s charity projects are aimed at both education and medical care. Five social and sport projects oriented at disabled children, orphanages, children in a difficult real-life situation are organized in Russia nowadays.

From 2007 until 2011 Amway donated about 76 million RUB for implementation of corporate social responsibility projects in Russia.[68]

Country	Russia
Year of entry
Industry/ business area	Nutrition, beauty and household products
Entry mode	Export. OOO "Amway"is a member of the Russian Direct Selling Association (RDSA) that consists of direct selling companies operating in Russia.
Motives	Business development. Empty niche of ecological detergents in Russia. Growing understanding of Russian customers of necessity to care about the environment.
Firm specific advantagesused on the foreign market	Opened in Moscow in 2008, Amway Training center helps to raise public awareness about Amway, its brands and services. Different media and corporate events occur there.[69] The widely-known charity orientation of the company. Ecological essence of the products. Dedication to the environment.
First mover or follower	Amway has its own niche on the Russian market, where there are no significant competitors.
Type of state involvementin the process of internationalization	No direct state involvement in the process of internationalization. Social responsibility of Amway, however, creates a positive attitude toward the company, which might do a favor during the process of internationalization.
Evaluationof the success of the internationalization	The internationalization of Amway in Russia was successful. There is a huge base of loyal customers in Russia nowadays. Brand has a strong positive image and opportunities for further expansion in Russia.

Major Auto

State influence: Is a private car retail company which was founded in 1998 by ex-managers of Musa Motors. [70]

Internationalization: Nowadays Major Auto is the dealer of 32 car brands. The company possesses 32 affiliates in Moscow region and 6 ones in St.Petersburg.[71] In 2001 Major opened its own logistic center Major Cargo Service. The year 2003 was the year of Major Express opening (express-delivery of correspondence and small loads). In 2004 Major Auto Trans, division responsible for car transportation was opened. Major auto has a strong presence in the Russian market, but there are no plans for internationalization of the company so far.

Conclusions

After analysis of the retail industry the following conclusions can be derived:

Retail is mostly common in food, consumer goods, automotive and electronics segments. The industry is quite fragmented with 38 significant players at the Russian market. These companies are also various in terms of their origin and degree of internalization: so there are such huge international giants as Auchan and global chains – Oriflame, Avon and Amway, as well as retail chains operating only domestically and having no intentions to increase their global presence.

Most of stories if internalization are stories of success as companies go international (domestic companies going outward from Russia or foreign companies going inward) typically after they have accumulated substantial financial resources, operational experience and sample market testing (usually at the domestic market).

Russian companies usually start their international expansion gradually: typically from neighboring CIS or CEE countries; they consistently acquire positive experience and valuable feedback on their performance and then deepen their presence at the international arena (a great example of Centr Obuv going to Ukraine, Poland and Baltic countries).

One failure story about O’KEY entering the Ukrainian market happened because of peculiar time period when the company went abroad just before the crisis. Moreover, there were some questionable details on how quickly the company abandoned the market after it announced to suppliers that it couldn’t meet requirement and pay back money. So we can consider this example as an exception but not the rule for the whole industry.

As for international companies, they usually appeared at the Russian market quite soon after collapse of the USSR and enjoyed early benefits from rapid growth of the emerging Russian market. It is logical: demand for essential goods is most likely to grow (as the overall trend), therefore, foreign companies that entered the Russian market, had great perks from early presence at the market.

As for the state involvement, it can’t be considered as a significant factor of successful business activity at the market because kit is competitive, no companies (or at least we haven’t found supportive data) are exposed to special treatment from the state authorities.

The only measure of state support is intended financial aid during the crisis in 2008 to several retailers, such as Magnit, Lenta, DIXY, The Seventh Continent and others but it turned out to be not that influential and the state authorities only contributed to more attractive conditions of refinancing at state-owned banks or backed up loans with guarantees (e.g. Pharmacy Chain 36,6).

However, retail industry requires substantial governmental control and monitoring as retailers usually distribute essential goods and quality of food, pharmaceuticals, cosmetics or electronics is an essential indicator for the state.

[1] http://www.fontanka.ru/2010/02/24/035/

[2] http://retail-tech.ru/food/articles/1704/28637/

[3] Moscow, Moscow region, Bryansk, Vladimir, Ivanovo, Kaluga, Kostroma, Ryazan, Smolensk, Tver, Tula, Yaroslavl regions

[4] St.Petersburg, Leningrad, Kaliningrad, Murmansk, Novgorod, Pskov, Vologda regions, Republic of Karelia

[5] Chelyabinsk, Sverdlovsk, Tyumen regions

[6] The company web site http://dixy.ru/en/about

[7] Percentage is calculated based on number of stores of each format.

[8] This IT system is also used by Сarrefour, Tesco, Ahold and Casino and helps improve the efficiency of all business processes, lower costs, and increase inventory turnover

[9] http://quote.rbc.ru/topnews/2011/06/03/33312170.html

[10] http://1prime.ru/INDUSTRY/20120821/757343805.html#photo_0

[11] http://retail-tech.ru/food/articles/1704/28637/

[12] St Petersburg, Novosibirsk, Omsk, Nizhny Novgorod, Krasnodar, Barnaul, Astrakhan, Volgograd, Petrozavodsk, Tolyatti, Tyumen, Ryazan, Naberezhnye Chelny, Saratov, Penza, Novorossiysk, Rostov-on-Don, Pskov, Tver, Cheboksary and other Russian cities

[13] http://www.lenta.com/index.php?path=node/785

[14] http://okeyinvestors.ru/

[15] http://delo.ua/business/bankrotstvo-seti-okej-smozhet-li-estonskij-investor-najti-nov-192637/

[16] http://www.rbcdaily.ru/market/562949982701140

[17] http://www.okmarket.ru/en/about-us/

[18] Shareholders: Petr Kellner - 94,25% (№76 global Forbes 2009), Irzhi Shmeits - 5%, Ladislav Bartonichek and Jean-Pascal Duvieusart (2010), the company site

[19] http://www.eldorado.ru/company/

[20] http://www.gazeta.ru/business/2008/04/02/2684225.shtml, http://www.vedomosti.ru/newspaper/article/262111/partnerskaya_sdelka

[21] http://www.eldorado.ru/help/eldorado/about.php

[22] http://www.svyaznoy-group.ru/news/releases/svyaznoy-announces-new-corporate-structure-and-elects-directors/

[23] http://www.forbes.ru/news/71471-svyaznoi-sozdaet-holdingovuyu-strukturu-svyaznoy-nv

[24] http://www.svyaznoy-group.ru/about/directors.php

[25] http://www.svyaznoy-group.ru/about/coverage.php

[26] http://www.svyaznoy.ru/info/history/

[27] Calculated based on number of shops

[28] http://www.svyaznoy.ru/info/history/

[29] An overview of the Russian and CIS automotive industry. Ernst&Young. February 2012. http://www.ey.com/Publication/vwLUAssets/Russian_and_CIS_automotive_industry/$FILE/Russia%20Automotive_2012.pdf

[30] Avtomir Group. Annual report 2011. http://www.avtomir.ru/default.asp?trID=7210&cityID=6981

[31] Euroset. The art of retailing. Alexander Shevko. Economy of Belarus Magazine. http://belarus-economy.by/econom_eng.nsf/all/9A630D2208FE6D4A422572C700382B7F/$File/25_1.pdf

[32] http://leroymerlin.ru/advance/

[33] “Российские компании, которые получат господдержку. Полный список”.25.12.2008 http://ria.ru/crisis/20081225/158098785.html

[34] “Седьмой континент ушел с рынка Белоруссии”25.10.2011.КомерсантЪ http://www.rbc.ru/digest/index.shtml?commersant/2011/10/25/33455895

[35] Jorma Larimo, Ari Huuhka, «Internationalization of the biggest Finnish and Swedish retailers in the Baltic States and Russia», Journal of East-West Business, 13 (1), March 2007, 82.

[36] Moscow, Moscow, Kaluga, Sverdlovsk, Chelyabinsk, Tyumen, Kurgan, Tomsk, Perm regions, Republic of Bashkortostan, Siberian Federal District, the Khanty-Mansi and Yamal-Nenets Autonomous District

[37] Based on number of stores

[38] http://www.grinn-corp.ru/home/about.html

[39] http://www.dddkursk.ru/number/931/new/008174/

[40] Orel, Kursk, Belgorod, Voronezh, Lipetsk, Tambov, Bryansk, Kaluga, Tula, Smolensk regions

[41] http://www.forbes.ru/profile/korporatsiya-grinn

[42] http://www.business-car.ru/structure/

[43] http://www.business-car.ru/about/

[44] http://www.kommersant.ru/doc/1942127/print

[45] http://2012.therussiaforum.com/forum/companies/centrobuv-2/

[46] http://www.sostav.ru/news/2011/12/07/cod4/

[47] http://www.kommersant.ru/doc/1942127/print

[48] http://www.forbes.ru/svoi-biznes/master-klass/108174-kak-tsentrobuv-zavoevyvala-molodezh

[49] http://news.averydennison.com/press-release/rbis/centrobuv-first-russian-fashion-retailer-use-rfid-enhance-shopping-experience

[50] http://www.globus.ru/about/history/

[51] http://riarealty.ru/news_cre/20120416/397622052.html

[52] http://www.avon.ru/PRSuite/static/become_a_rep_promosite/about.html

[53] http://zhukvesti.ru/articles/detail/32063/

[54] http://www.ataksupermarket.ru/about.html

[55] http://www.vedomosti.ru/newspaper/article/2010/01/21/223405

[56] http://www.2stocks.ru/main/invest/stocks/article/rbz270110

[57] http://www.hol-omsk.ru/supliers.html

[58] История Oriflame http://www.oriflame-shop.int.ru/history.html

[59] “Оriflame построит свой самый крупный в мире завод в Подмосковье” 08.09.2010. Газета.ru. http://www.gazeta.ru/news/business/2010/09/08/n_1544482.shtml

[60] Oriflame: Кто такие наши конкуренты? Что такое конкуренция? http://www.oriflame.ws/34.html

[61] 45 фактов об Орифлэйм. http://www.oriflames-samara.ru/KAM/docs/45.pdf

[62] Ритейл премиум класса. “Сфера интересов”. РБК. 24.06.2008 http://www.azbukavkusa.ru/index.aspx?sPage=3278

[63] “В Украину выходит сеть «Азбука вкуса»”. Building. 25.01.2013.. http://building.ua/V-Ukrainu-vyhodit-set-Azbuka-vkusa

[64] http://www.obi.com/de/company/en/Expansion/fKontakt/index.html

[65] Retail Business review http://www.retail-business-review.com/companies/obi-franchise-center-ooo

[66] “Фонды обкатывают Genser”. Ирина Парфентьева, Екатерина Дударева. Газета "Коммерсантъ", №145 (4200), 11.08.2009 http://www.kommersant.ru/doc/1219113

[67] http://www.genser.ru/ru/region/

[68] One-by-one campaign for children in Russia. http://www.amway.ru/en/about-amway/amway-in-local-market-copy1/one-by-one-in-russia

[69] Amway in Russia. http://www.amway.ru/en/about-amway/amway-in-local-market-copy1

[70]Forbes profile: Major http://www.forbes.ru/profile/major

[71] http://www.major-auto.ru/company/

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