Operational Challenges Facing Emerging Multinationals from Russia and China

This study examined 92 cases of Chinese and 55 cases of Russian transnational companies. 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. The report emphasized questions that were characteristic of the global expansion of TNCs from developing countries, and analyzed most problems appearing after agreements are made, not during their preparation and signing.

The key findings of the research are as follows:

• 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.
• 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.
• 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.
• 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 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.