Moscow, Beijing, June 18, 2009. - In light of the global recession, transnational corporations (TNC) from developing countries are being called "victims" of their success and winners that surpassed the competition. A more careful look at the current situation shows that, even though the financial crisis and falling demand has seriously affected TNCs, most of them survived the ordeal and were able to, at the very least, prevent a collapse of their newly crafted global structure. However, it is still too early to predict whether or not they will be able to efficiently manage their accumulated assets. They must still face many serious problems, some of which are related to national factors, others stemming from cultural differences and others yet from relative inexperience in global enterprise management.  

The SKOLKOVO Institute for Emerging Market Studies presents the study “Operational Challenges Facing Emerging Multinationals from Russia and China”. During this study, 92 cases of Chinese and 55 cases of Russian transnational companies were analyzed, and 6 primary challenges were isolated as being faced by these companies in the new economic conditions, complete with suggestions of how to deal with these challenges efficiently. This study emphasized questions that were characteristic of the global expansion of TNCs from developing countries. This work analyzed mostly problems appearing after agreements are made, not during their preparation and signing. 

According to the results of SKOLKOVO research, one significant issue for transnational corporations is a misapplied organizational model that stunts their global development. Many large companies, whether Russian or Chinese, have retained the old bureaucratic structures from the times of governmental control. These structures can obstruct the companies' entry to the global market. For example, one of China’s largest oil drilling companies, Sinopec, is composed of twelve large regional divisions. As these divisions all pursued varied political and economic goals, they entered the global market separately as well, resulting in duplicate investments and “consuming” of one another. In the end, in 2003 the company had to create a global division responsible for managing all global activity. Today, transnational companies are advised to create a scalable structure, and separate the responsibility of local offices and the corporate centre, allowing the separation of strategic functions from operational ones.

Another multinational corporations’ ‘weak link’ in the process of managing their foreign subdivisions is passing on the knowledge and the experience efficiently. Lately, the goal of many Russian and Chinese companies’ global investments was the acquisition of knowledge. This is related to joint enterprises not giving the expected result: even though foreign companies are interested in entering new markets in exchange for technologies, most of them are not eager to trade key knowledge with partners from developing countries. Thus, despite the auto company SAIC's joint ventures with GM and Volkswagen concerns, the key parts for their joint production must be imported. Thus, SAIC acquired the Korean concern SangYong, to acquire such technologies as hybrid engines. 

However, not all advantages of such acquisitions (even the creation of research centers abroad) can be realized. The reason: cultural differences and the complexity of the information control process.

Successful acquisition of knowledge from foreign companies is quite possible. For example, purchasing the PC division of IBM has allowed the company Lenovo to acquire laptop creation technologies. Thanks to this deal, the company did not only acquire patented IBM technologies, but research and development resources, as well as specialists. However, the transfer of knowledge often requires considerable effort to change the process of information control employed by the “source” company.

Knowledge accumulated in a foreign daughter company can be difficult to acquire, but that is not the biggest issue. In order to effectively apply that knowledge and integrate it into its own structure, the organization itself must change. 

Among other operative issues mentioned in the SKOLKOVO research is the lack of trained personnel, regulating labor relations and political as well as legal risks, and low brand recognition. Primary recommendations for the solution of these problems are involving local staff in the management of the company and the creation of an international team, differentiation of HR strategies and labor relations depending on the country, thorough examination of information related to political and legal aspects in the country, and development of risk-management mechanisms.

More detailed information can be found in SKOLKOVO's survey.

Additional information:

SKOLKOVO-2008 Ranking of Russian MNEs

SKOLKOVO-2007 Ranking of Russian MNEs 

SKOLKOVO Institute for Emerging Market Studies (SIEMS).  Headed by Professor Seung Ho “Sam” Park and based in Beijing, China, SIEMS aims to be a leading think tank on fast-growing economies, with a special emphasis on Russia, China, and India. The work of the institute is focused on providing guidance to society, corporate managers, and policy makers through rigorous but practical knowledge creation across a broad range of areas, including macro-economic and public policy, industry and technology, and corporate strategies.

SIEMS’ research is interdisciplinary, covering various fields of social science with a comparative approach across the three countries, and network-based, involving scholars from all around the world. Its researchers include full-time members from or working on the three main countries, as well as fellows from other areas currently involved in active research on fast-growing markets. The institute aims to be a hub for the creation, distribution and sharing of knowledge among scholars and managers working with fast-growing markets worldwide through regular roundtable meetings and forums. Its research output is distributed chiefly through working papers, reports, books and articles, and conferences devoted to special topics.

Moscow School of Management SKOLKOVO is a joint project by major Russian and international business leaders, who combined their efforts to create from scratch a new generation of business school. While providing students with practical skills, SKOLKOVO looks to develop a new type of managers -- leaders who will use their professional knowledge in the conditions of rapidly changing global markets.  SKOLKOVO is distinguished by its vision based on a unique mix of three dimensions: entrepreneurial leadership, fast-moving economies and experiential learning.

The SKOLKOVO project is being realized in partnership with the government of the Russian Federation and is part of the national priority projects programme, funded exclusively by private business. President of the Russian Federation Dmitry Medvedev is the Chairman of the SKOLKOVO International Advisory Board. 

Since 2006, SKOLKOVO has been conducting short-term Executive Education programmes for high- and mid-level managers. These programmes have the form of an open format, as well as specialized, complex modules created by specific company requests.  Since January 2009, Еxecutive МВА Programme has been conducting courses and the admission process for the January 2010 class has already begun. SKOLKOVO Full-time MBA programme is currently finishing the admission process to its first class due to begin studies in September 2009. The unique SKOLKOVO campus will open its doors for visitors in September 2009.

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