Establishment of pulp and paper production in Russia : assessment of obstacles

Abstract: This essay is written for the purpose of finding out why so few international pulp and paper companies have established production in Russian. It identifies the main obstacles potential investors perceive. This essay has its theoretical ground originates from the PEST model, the resource based view of strategy, risk management. It also contains general reports of the Russian political and economic situation, as well as new material about the pulp and paper branch in the. Using this as a framework to sort and collect data, the main approach has been empirical To collect the necessary information for this essay the following three methods have been used: (1) Field study observation In March, I participated in a Russian field study. The purpose was to observe the cultural and the political system, experience the infrastructure and the see for myself potential for establishment of forest industries. It was also possible to visit forests and firms that had previously invested in Russia. (2) Questionnaires Questionnaires were sent out to 14 international pulp and paper companies. Here 11 detailed questions about Russian pulp and paper industry were posed. (3) Interviews Three semi-structured interviews were carried out. One with a company that was currently considering the potential of investing in production capacity in Russia, one company who has successfully established sawmill production in Russia, and one that had initiated some production investments and later withdrew. A general summary is that there are many obstacles to establishing production in Russia, with the most significant ones being Russia's political climate, legal barriers and the infrastructure. These obstacles are of great importance and need to be resolved in order for potential investors in pulp and paper to feel safe. While this dissertation does not focus on finding solutions to such obstacles, its intention is nonetheless to provide a thorough overview of the pulp and paper industry in Russia and so develop a foundation for understanding the obstacles. It has shown that companies are careful in considering the risk in establishing production in Russia, due to threat and odds their company faces within the industry. The general concept that there are first mover advantages when entering a new market are not considered advantages in the current Russian business climate. Companies who are interested in establishing production in the Russian economy need to be thoroughly prepared because the pulp and paper industry is currently is an early development stage and many changes are expected.