Advantages and disadvantages of international contract manufacturing : The opportunities for Finnish companies in Russia
Kasyanova, Natalia (2016)
Kasyanova, Natalia
Savonia-ammattikorkeakoulu
2016
All rights reserved
Julkaisun pysyvä osoite on
https://urn.fi/URN:NBN:fi:amk-2016060912560
https://urn.fi/URN:NBN:fi:amk-2016060912560
Tiivistelmä
The thesis is aimed at helping business structures in Finland to find out better ways for producing goods.
The research was executed for Finnish companies’ interested in doing business in Russia (with Russia), for companies which are looking for suitable conditions to produce goods. The research problem is defining the advantages, disadvantages and opportunities for Finnish companies to perform toll manufacturing in Russia. The features of toll manufacturing agreement and implementation in Russia as well as impact of contract manufacturing on countries are discussed.
The qualitative method of research was chosen as the most appropriate. The theoretical framework for the thesis covers the questions of contract manufacturing practice in general, and toll manufacturing in particular, their advantages and disadvantages, especially for Finnish companies in Russia, the regulation of toll manufacturing in Russia, Finnish-Russian economic relations. The empirical part is based on the case study method, the cooperation in toll manufacturing between Finnish concern PKC Group Oyj and Russian AEK Ltd was researched. The data was collected through interviews with companies’ representatives, observations and reports on activities, statistical information.
An undeniable advantage is the geographical proximity of countries in addition to perfect logistic itineraries between Russia and Finland and transport corridors both in Russia and Finland. However, Russian customs rules and rough roads may put companies at a disadvantage.
Russia and Finland have comparatively similar cultures, a long history of intercommunication between neighbouring countries, stable economic relation, existing experience of other Finnish companies which present on the Russian market – all these factors can make working in Russia easier.
Ordering customers may find better managerial solutions for optimising business, reducing costs, increasing profits, expand markets, and, if domestic sources remain more expensive than foreign, the Russian market is opened for them. Russian monotowns or special economic zones in Russia would be perfect places where to start. Placing orders, the hiring firms contribute to processing economy (increase in GDP, taxes, etc.), provide employment (especially women and youth). At the same time, they contribute to the economy of their residence, because the taxes from their earnings are usually paid at place of the company’s residence or main activity.
There are only a few companies from Finland practising toll manufacturing in Russia, so it is difficult to evaluate performance and outcome yet. At the same time, there are some localized production in Russia, but finished products are aimed at Russian market.
Russia is looking for reduction of technological gap in the production of high-tech products in the electronic sector and creation of serial production. There is also a need to utilize idle capacities in existing Russian industries.
Companies can have advantages of the untapped Russian market potential especially in case if production and further distribution will be targeted for consumption within Russia or in CIS countries. There will be demand for world class products on the Russian unsaturated market, especially if disposable income grows. It might be to Finnish companies advantage to locate close to customers. A combination of different methods of operations may also be considerable advantage.
The research was executed for Finnish companies’ interested in doing business in Russia (with Russia), for companies which are looking for suitable conditions to produce goods. The research problem is defining the advantages, disadvantages and opportunities for Finnish companies to perform toll manufacturing in Russia. The features of toll manufacturing agreement and implementation in Russia as well as impact of contract manufacturing on countries are discussed.
The qualitative method of research was chosen as the most appropriate. The theoretical framework for the thesis covers the questions of contract manufacturing practice in general, and toll manufacturing in particular, their advantages and disadvantages, especially for Finnish companies in Russia, the regulation of toll manufacturing in Russia, Finnish-Russian economic relations. The empirical part is based on the case study method, the cooperation in toll manufacturing between Finnish concern PKC Group Oyj and Russian AEK Ltd was researched. The data was collected through interviews with companies’ representatives, observations and reports on activities, statistical information.
An undeniable advantage is the geographical proximity of countries in addition to perfect logistic itineraries between Russia and Finland and transport corridors both in Russia and Finland. However, Russian customs rules and rough roads may put companies at a disadvantage.
Russia and Finland have comparatively similar cultures, a long history of intercommunication between neighbouring countries, stable economic relation, existing experience of other Finnish companies which present on the Russian market – all these factors can make working in Russia easier.
Ordering customers may find better managerial solutions for optimising business, reducing costs, increasing profits, expand markets, and, if domestic sources remain more expensive than foreign, the Russian market is opened for them. Russian monotowns or special economic zones in Russia would be perfect places where to start. Placing orders, the hiring firms contribute to processing economy (increase in GDP, taxes, etc.), provide employment (especially women and youth). At the same time, they contribute to the economy of their residence, because the taxes from their earnings are usually paid at place of the company’s residence or main activity.
There are only a few companies from Finland practising toll manufacturing in Russia, so it is difficult to evaluate performance and outcome yet. At the same time, there are some localized production in Russia, but finished products are aimed at Russian market.
Russia is looking for reduction of technological gap in the production of high-tech products in the electronic sector and creation of serial production. There is also a need to utilize idle capacities in existing Russian industries.
Companies can have advantages of the untapped Russian market potential especially in case if production and further distribution will be targeted for consumption within Russia or in CIS countries. There will be demand for world class products on the Russian unsaturated market, especially if disposable income grows. It might be to Finnish companies advantage to locate close to customers. A combination of different methods of operations may also be considerable advantage.