The Case Of Brewing Sector In Russia

7710 words - 31 pages

1. INTRODUCTIONThe aim of this report is to evaluate the viability of investment by Hong Leong Group in Russia and in particular in the brewing industry.The first step of this project is to analyse the decision of choosing Russia as an offshore location. This decision has been based on the attractiveness of the country in terms of its financial structure, people skills and availability and business environment.The study will be followed by an analysis of the macro environment of Russia using a PEST, SWOT analysis and Porter's diamond framework. These analyses will enable the Board to acquire a better understanding of Russia's current situation and its capabilities and future opportunities.The international environment in terms of FDI would be then briefly analysed, concentrating mainly in the Russian situation.Great emphasis will be placed on presenting the Russian legal regime, regulatory environment and risks factors that may affect investment decisions in this country due to the crucial role that these issues play in investment decisions.The most profitable industries of the Russian economy will be analysed, followed by a more in depth analysis of the brewing industry.Finally, the different foreign market servicing strategies that may be suitable for Hong Leong Group will be presented. The decision of location of headquarters and functional areas will be also considered.2. SELECTION OF THE COUNTRYThe country selected is Russia, which is considered to be one of the twenty-five leading emerging economies. This decision was carefully taken after analysing its location, capabilities, current situation and potentiality.A. T. Kearney developed the offshore location attractiveness index for 2004, which aimed to evaluate the attractiveness of countries as offshore locations. The criteria used to evaluate countries concentrated on three areas: financial structure, people skills and availability and business environment. Figure 1 summarises the top 25 offshore locations, being Russia included in this top league of countries.Figure 1. A.T. Kearney Offshore Location Attractiveness Index 2004.Note: The numbers in the bars are index numbers. The weight distribution for the three categories is 40:30:30, meaning that the financial structure is rated on a scale of 1 to 4, and that business environment, and people skills and availability are on a scale of 1 to 3.Source: A. T. Kearney. (www.atkearney.com/shared_res/pdf/Making_Offshore_S.pdf).According to this index Russia's strength as an offshore location is its financial structure and, people skills and availability. However, Russia's efforts should concentrate on improving its business environment. Russia's financial structure is ranked sixth according to this index after evaluating the country's tax and regulatory environment, infrastructure costs and compensation costs (see figure 2).Figure 2. A.T. Kearney Financial Structure Index 2004.Source: A. T. Kearney....

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