St. Petersburg State University Graduate School of Management

International Business Strategy

Group #5 Essay

Construction Materials and Construction

Anastasia Goldina

Ekaterina Gritskevich

Kirill Guryev

March 14, 2013 • St. Petersburg

Construction Materials

EuroCement Group

The EuroCement group¹ is an international, vertically-integrated industrial holding company, which manufactures construction materials. 

EuroCement group was formed in 2002 following the merger of Rosuglesbit and Shtern-cement. The company originally had four plants: Maltsovsky Portlandcement, Mikhailovcement, Lipetskcement, and Savinsky cement. But since 2005, following the purchase of seven additional cement plants, EuroCement group has become a leading company in the Russian cement market.

Now the EuroCement group is one of the biggest cement firms in the world. It has 16 cement plants across Russia, Ukraine and Uzbekistan, as well as several concrete mix plants, concrete goods factories and aggregate-mining quarries. 

The owner is Filaret Galchev

There is no direct government intervention in the construction materials’ industry, but some companies, for instance the EuroCement Group has the government as a partner. Company has connections with Russian Ministry of Regional Development. So it benefits becoming the main supplier of government construction projects. No financial or taxation support is provided. Moreover, it is important to add that the Antimonopoly Service controls the industry. In 2008 the EuroCement group had great scandal, paid out huge fines and was forced to decrease there market share².

Internationalization:

Country	Ukraine Uzbekistan
Year of entry	Ukraine 2005 Uzbekistan 2006
Industry/ business area	Construction materials
Entry mode	FDI brownfield Acquisition - purchasing old plants Wholly owned
Motives	Acquisition in these CIS countries is much cheaper than plant establishing in Russia Closest Neighbors Cheaper raw materials Cheaper labor Boom in construction industry in Russia (most of the production goes to Russia to serve the construction market) Development of construction industry in Ukraine and Uzbekistan and everyday growing demand for concrete Concrete production must be close to construction project
Firm specific advantages used on the foreign market 3	High-technology Well established consumer base Better quality Lower prices than small firms offer
First mover or follower	No information available
Type of state involvement in the process of internationalization	State did not participate directly
Evaluation of the success of the internationalization	The internationalization was extremely successful. The profit was increase by 52% in 20084. Then because of the crises was a decline but the company is recovering.

LSR Group

LSR Group⁵ is a real estate and building materials company, established in 1993 in St. Petersburg and operating in a number of complementary market segments.

The integrated business model combining two areas of business – real estate development and construction and building materials and aggregates – provides a strong competitive advantage in the Russian market. 

The company unites business units for production and transportation of building materials, extraction and processing of aggregates, construction and real estate development – from mass-market to elite residential properties.

Currently the company operates in three key regions:

- St. Petersburg and the Leningrad region

- Moscow and the Moscow region

- Yekaterinburg and the Urals region.

LSR Group is an open-joint company, and owns 100% of its subsidiaries.

The main shareholder is Andrey Molchanov – senator from the Leningrad region.

So as was told before there is no direct government intervention in the construction materials’ industry. No financial or taxation support is provided.

Moreover, the Antimonopoly Service controls the industry. The LRS group actually benefits from it because the main competitor – EuroCement Group – was forced to reduce their production.

Internationalization:

Country	Ukraine
Year of entry	2008
Industry/ business area	Construction materials (No construction)
Entry mode	FDI brownfield -Acquisition of Obukhiv Porous Concrete Plant (€30mln6) -Establishing of new Plant for the Production of Aerated Concrete in Berezan (€43mln7) Wholly owned
Motives	Closest Neighbor Cheap labor Obukhiv Porous Concrete Plant is the biggest porous concrete producer
Firm specific advantages used on the foreign market	By acquiring the Obukhiv Porous Concrete Plant the LSR group got the biggest market share Modernization made the quality higher
First mover or follower	Compare to other Russian companies operating in the same country and the same business area, the LSR group was not the first mover.
Type of state involvement in the process of internationalization	State did not participate directly.
Evaluation of the success of the internationalization	The internationalization was extremely successful. First of all, diversification of products. Very high market share and profit.

The Tarkett Group

The Tarkett Group is a privately owned, multinational French company specializing in sustainable flooring and sports surfaces. In 2012 the company had revenues of € 2.1 billion, 32 production sites and employed around 9 200 people in over 100 markets across the world. World wide sales were split between: 5% North America, 35% European Union, 38% Emerging countries and 2% Other OECD countries⁸.

The enter to Russia market started in 1995, when Sintelon started production with Russian company "Roof and Polymers" under the brand "Sinteros". In 2002 the joint venture of the Russian and Serbian entities of Sintelon AD formed the largest vinyl flooring company in Russia, Ukraine and the Balkans.

There was no government participation.

We do not think it necessary to consider this company in the project, because it is not relevant with the task. The Russian company is not entering the foreign market, but foreigner is entering to Russia.

Construction

Glavstroy

Glavstroy provides strategic management of building assets of the "Basic Element" Group. It includes companies operating in the field of real estate development, construction engineering, construction, transport infrastructure and building materials.

Glavstroy perform full cycle activities - from the extraction of raw materials that are required for the production of construction materials to the construction itself and commissioning technologically unique objects.

Key companies in the construction business - Transstroy, Glavmosstroy, Glavstroy Development, BaselCement.⁹

The main activities:

- Development

- Housing and civil engineering

- Transport construction

- Design

- Production of building materials

The main shareholder of Glavstroy is the "Basic Element Group" of Oleg Deripaska. Minority shareholders - foreign strategic shareholders: Zigfrid Wolf (Chairman Glavstroy) and Peter Koub (Member of the Board of Directors Glavstroy).

CEO "Glavstroy" - Arkady Sarkisyan