Developing an entry strategy for emerging markets: The case of the Russian snack food industry

Abstract

The aim of this study is to examine and analyze the characteristics and problems of entering the Russian market of snack foods, and the internationalization of foreign enterprises to the market. The literature review discusses the concepts of foreign market entry and internationalization. Different entry modes are compared in terms of operational strategies and goals of the company. Several theories of internationalization suitable for small firms are analyzed – namely the network theory, stage theory, the innovation model and the international entrepreneurship theory. The thesis also addresses the topic of international business and internationalization of the earliest theories in an attempt to gain a deeper understanding of the role of the entrepreneur in the process of internationalization. In addition, analysis of industry of Russian snacks is also presented, with emphasis on the problems companies face in entering this market and how they cope with these problems. The empirical part consists of an explanatory case study of two companies entering the market snacks - one at the expense of exports, while the other through direct investment. Data sources in this case study include six open-ended interviews based on semi-structured questionnaires, three visits to the company a factory visit. Additional case study evidence includes import declarations, factory receipts, technical specifications and business proposal of one of the studied companies. Empirical studies show that for the two separate firms studied, international entrepreneurship models are most suitable for studying the process internationalization. The empirical study supports previous research on the entrance to the Russian market. The main problems identified are: corruption, bureaucracy, law, economic crime and the rights of ownership, control and confidence. These problems are present to some extent in both cases, as in the exporting firm and firm directly investing, but the company's resources used for solving these problems are different. When exporting, key resources are the skills and opportunities of the entrepreneur, and the desire to learn from mistakes, and networks. For direct investment, the main resources are highly skilled staff, local business experience, logistics and supply chain management, organization and financing of the company. Thus, the study concludes that direct investment has greater risk and burden than the export. Furthermore, exporting via an agent is the most suitable entry mode for the snack food industry, if the firm seeks to minimize risks.