1. STROI network – project presentation. Discussion seminar. 9-11 February 2009 1 Results for the P5: Customer Orientation and Marketing Olga Tretyak, Marina Weck, Ekaterina Buzulukova, Alexander Rozhkov, Nikita Popov 10 February 2009

2. STROI network – project presentation. Discussion seminar. 9-11 February 2009 2 Results for the P5: Marketing The research on Marketing perspective is organized in three parts: developing a network of partners, implementing CRM and SCM Participant supplier (RU) Participant buyer (FI) Participant supplier (FI) Participant supplier (RU) Participant buyer (RU) Focal company (FI) Participant buyer (FI) Supply chain management Customer relationship management 1a. Nurturing network of partners on the Russian market 1b. Building trust in counterweight to risks Part 1 Part 3Part 2

3. STROI network – project presentation. Discussion seminar. 9-11 February 2009 3 Results for the P5: Marketing Insights from the interviews on Market entry strategies Two types of Russian market entrance strategies: –Developing representative office -> extending market presence –Mergers and acquisitions of Russian companies Two marketing strategies: –Developing customers (project development, proactive product development) –Profit-seeking behavior

4. STROI network – project presentation. Discussion seminar. 9-11 February 2009 4 Results for the P5: Marketing Can competitive advantages be used to cope with business environment challenges at the operation stage? Developed and improving technology Higher quality of products Local production Active support of the parent company Financial stability Comprehensive solutions for the customer High reputation and strong brand name Trust, honesty and responsibility for results Helping customers in solving their own problems Vision of competitive advantages by the Finnish firms Legal risks that are rarely understood: high administrative and criminal liability of the general director in Russia Long and unclear procedure of construction project negotiation and agreement Difficulties in land purchasing Trust to the Russian partners from Finnish side and disbeliefs from Russian managers Need for permanent control of Russian partners Often it is that the general director is the only right person to communicate with to achieve quick and quality results Business environment challenges

5. STROI network – project presentation. Discussion seminar. 9-11 February 2009 5 Results for the P5: Marketing Building trust in counterweight to risks. What are the risks? While the empirical research is not fully completed, the acquired data allow illustrating only intermediate results Please, see the diagrams 1, 2 and 3 (in your handouts) that show the probability of identified risks involved in inter-organizational relationships and their negative effect on trust between partners as well as conditions associated with positive changes in trust

6. STROI network – project presentation. Discussion seminar. 9-11 February 2009 6 Russian salespeople as a main vehicle for problem solving Results for the P5: Marketing On the customers side, Russian sales staff is the main adaptation instrument at every stage of relationship development Initially very strict requirements for on-time delivery and quality assurance Coordination challenges when the deal has been secured Stage 1 Initial contact Stage 2 Initial transaction Stage 3 Repeated transactions Payment delays Contract fulfillment Very high entry barriers Difficult to embed into existing relations Dealing with complex construction legislation and certification Customer representatives demanding bribes Loyal customers Solutions: Customer intelligence Getting straight to the CEOs Bribery reporting to CEOs of customer companies Solutions: Signaling to suppliers Securing suppliers’ commitment Solutions: Getting a sense of customers’ occasion Reaching compromise

7. STROI network – project presentation. Discussion seminar. 9-11 February 2009 7 Results for the P5: Marketing Although marketing people deny that they differentiate between customers… “The number of customers decrease because of the crisis in construction” “Demand shrinks, so customers gain more market power” “All customers are only seeking lower prices” “Contracting in Russia is always formal” Declared: no differentiation “All customers are equally valuable” “All benefits and discounts are delivered on unified contract terms”

8. STROI network – project presentation. Discussion seminar. 9-11 February 2009 8 Results for the P5: Marketing … there is proper strategic prioritization in place “We prioritize customers on the basis of…” - Sales volume - Growth potential - Size of the business Actually, there is strategic differentiation “Benefits provided depending on the customer’s status in terms of…” - Price reductions - Fast delivery - Ready to adapt contracts to requirements of highly important customers

9. STROI network – project presentation. Discussion seminar. 9-11 February 2009 9 Results for the P5: Marketing Purchasing side: how customer orientation imperatives translate into requirements for suppliers Managing social and contractual relationships in Russia is an area of weakness Certain relationship management capabilities should be developed High influence of social networks: relations with key people CEOs personal influence on decisions is not strong in purchasing Stage 1 Make or buy decisions and supplier selection Stage 2 Managing supplier relationships Stage 3 Organizing for effective purchasing Purchasing is not highly centralizedHigher in-house share of production due to knowledge-sharing hostility and relational uncertainty Supplier capability, reputation and trustworthiness are the 3 musts Both delivery time and variability are advantages for suppliers ‘Finns prefer Finns’ vs. ‘Committed Russian partners’ Market- responsive supply