STROI Network Project P4: Internal Development Nadezhda Bek Alexander Settles NinaVladimirova Nikolay Filinov

Contents Research of strategy process Research of subsidiaries' management Research of internal process from the point of view of learning organization concept

Comparison of companies’ network strategies Assistance to client in project development. After sales service. Purely contravt relations. Suppliers are selected on tender basis. Partnership mainly with public and municipal companies There are obligations to municipalities Relationship pecularities Joint market offeringBased on value chain Model of cooperation CustomersCurrent competitors SubcontractorsThe dominant market force Lifting- equipment Construction materials retail Cleaning serviceSpecific factors

Comparison of companies’ network strategies Client development, joint projects Short-term contracts based on market mechanisms Building suppliers' and government relations Network strategy Close link with customer Operational superiority (differentiation)‏ Strategy of business Local GlobalStrategies of international expansion Lifting- equipment Construction materials retail Cleaning serviceSpecific factors

Difficulties for replicating network model in Russia Russian legislation influences company regulations of partners' relations Strategic descisions have to be coordinated with local authorities and included in their strategy

Conclusions Most important factors:  Business environment: legal and institutional factors  Business model type  Type of strategy of international expansion  Forms of strategic control including ownership

4 generic mechanisms for assuring compliance with standards Centralization means that certain processes are carried out exclusively at the mother company Formalization, which stands for imposing of formal (written) rules, policies and procedures Output control means that subsidiaries are obliged to report certain numerical indicators to the HQ Socialization

Hofstede's estimates for Finland and Russia

Consequences for management High level of UAI means that in both countries employees have needs in rules and instructions. Thus there is a favourable outlook for implementation of all types of formalization. Features of the Russian culture preclude that Russian employees focus on career rather than quality of life to greater degree than their Finnish counterparts. Higher levels of remuneration are more important. Assertiveness is valued higher than intuition.

Consequences for management Along with high PDI this means that an ideal manager is a kind of “good father”, demanding, but caring. This implies high level of concentration of power in the hands of the subsidiary CEO. In terms of HQ-subsidiary relationships it precludes lower tolerance to centralization.

Learning organization. Research questions Are Finnish firms organized around learning organization principles? What are the expectations of Finnish firms for their partners, suppliers, customers, etc. to be learning organizations? Are Russian firms open to learning organization techniques? Does a learning organization framework add value to such firms?

Initial Results Finnish business operating in Russia are attempting to replicate their knowledge management systems and employee feedback programs In Russian business culture top-management direction is crucial for all decisions including creating a learning organization Russian managers and organizations are culturally and historically unfriendly to the conditions needed to develop a learning organization  Initiative is unappreciated  Formalization is a key Russian value  Managers expect workers to conform to their direction

Russian Conditions Importance of informal networks Russian Managers in a foreign owned subsidiary are at times unsure of their role and therefore return to default Russian management practice  Expectations of Western Managers vs local subordinates and partners Difference in meaning of terms and concepts – Russia definition of learning as a formal process with results i.e. diploma as opposed to continuous process