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Meyer (2001a)Management > Comparative Management > Lectures > Independent Research > Meyer > In order to improve > Foreign entry
Foreign entryThe Russian market may seem appealing to Western firms, as the liberalisation of the economy has created a catch-up demand and the huge population of the country is potentially profitable. Russia has a comparative advantage in intermediate technical skills. Although wage levels have risen, they are still much lower than in the Western world Investors in Russia could benefit from acquisitions, but there is lots of bureaucracy and government intervention to deal with. Alternatively, Greenfield operations could be established, as this allows the investor to use its own strategic goals, without having to incorporate another firm’s strategies. MNEs tend to market their goods at the high end of the market, leaving the low end for local brands. MNEs face challenges with fragmented distribution channels and reliable marketing information is scarce. This suggests that such a firm needs high distribution intensity and multiple marketing partners. Umbrella brands have proven to be successful, appealing to many segments of the market, although people are very price-conscious. Brands can be effectively advertised on TV if appealing to local and cultural tastes. Issues with privatisation There are issues with privatisation:
A mixed ownership (private owner and the government) can be beneficial, as this may reduce bureaucracy, spread risk and lead to tax breaks and an increased network system. It has been found that firms with “residual state ownership” perform better than private joint ventures.
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