Export based strategy or manufacturing establishment? Speculating with Russian market Online publication date: Fri, 11-Jan-2008
by Olli-Pekka Hilmola, Desalegn Abraha, Harri Lorentz
International Journal of Logistics Systems and Management (IJLSM), Vol. 4, No. 2, 2008
Abstract: Among China and India, former Eastern European countries, and especially Russia has been identified as one of the most lucrative market, e.g. in retail sector. However, this market has experienced quite enormous changes during the last two decades, and manufacturing establishment is considered to contain numerous risks, especially functionality of supply chains (incoming flows and distribution) is one of the main reasons. Our longitudinal case study research confirms this, and shows how difficult it is to achieve comparable cost efficiency in Russia as compared to other factories inside of the same company, but operating in well-developed high-cost country. Due to this, and by the fact that foreign companies still favour export based strategies, we develop mathematical models to evaluate which foreign transit harbours would provide lowest distribution costs. Our research results show that only small number of seaports needs to be considered, if distribution costs are the only issue to be concerned.
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