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Systems of launching and mechanisms of realization of development projects in manufacturing subsidiaries of foreign multinational corporations (MNCs)

Priority areas of development: management
2014
Department: Laboratory of Corporate Strategies, Organizational Structures, and Management Innovations
The project has been carried out as part of the HSE Program of Fundamental Studies.

Object of study – Russian manufacturing subsidiaries of foreign multinational corporations (MNCs). 

Goals of the study :

  • to depict practices of companies from developed countries transplanted into emerging economies;
  • to describe how multiple interconnected problems are solved during project launch and implementation;
  • to increase knowledge about strategic aspects of MNCs’ activities in Russia..

Empirical base – interviews with six heads of country operations of MNCs, an interview of one CEO of a global corporation, studying open and confidential reports on particular tactical and strategic projects; secondary sources on companies’ operations.

Results.  Systems of project launch and implementation differ depending on the level of the project. On the tactical level Russian subsidiaries of MNCs have mastered  all advanced schemes of project management in different areas, including improvement of sales organization, new production facilities installation etc. The internal mechanics of such project is well developed, the roles of different groups in projects are documented in internal corporate guidelines.

At the “operational” level the difficulties of project launch in Russia are mounting. Russian subsidiaries have been unable to secure the status of strategic business units, so their corporate mandate is rather limited. Most of investment decisions are made in regional and especially in global corporate headquarters. Russian subsidiaries should address for investments to the global headquarters presenting very detailed itemization of capital expenses.

For strategic projects, the worsening of the economic situation in Russia and increasing uncertainty, complexity and “equivocality” of the business environment have transferred Russian assets of MNCs into “corporate competitive disadvantages”. Already in 2012-2013, Russian subsidiaries started to loose internal competition for installation of new production capacities. In mid-2013,  Western MNCs started a wave of capacities optimization, that includes closing down particular technically effective but economically inefficient (excessive) factories. Since summer 2014, all strategic projects implemented in Russia by MNCs went beyond the standards of capital allocation. There is increased discrepancy between CEOs and Boards of Directors. While CEOs have “gut feel” about the perspectives of Russian operations, Boards of Directors see sharply falling sales denominated in US dollars or Euro, inability to calculate NPV rank or timing of cash flow of projects in the current situation in Russia. As a result, during the last months there are intensive search for new forms to prove the necessity to continue operations in Russia, including manufacturing operations.

The level of novelty of the results - high .

The area of application of the results – Russian manufacturing enterprises that can copy the ways of organizing for small and medium-size project from Russian subsidiaries of MNCs. The Russian government that should find new forms to keep foreign investors to continue their manufacturing operations in Russia.

Publications:


Gurkov I. B., Kossov V. V. Combining Contemporary and Soviet-Era Management Practices to Achieve Excellence at Knauf CIS // Global Business and Organizational Excellence. 2014. Vol. 33. No. 6. P. 21-34. doi
Gurkov I. B. Corporate Parenting Styles in the Global Economy / NRU Higher School of Economics. Series MAN "Management". 2014. No. 20.