Russia is by far the largest of the former Soviet republics. Russia stretches from Eastern Europe across northern Asia to the Pacific Ocean. The 138 million people in Russia consist of 79.8 percent Russians, 4.8 percent Tartars, and a scattering of various others. The largest city and capital is Moscow, with about 12 million people. At present, there is continuing social and economic turmoil in Russia. Although prices are no longer controlled and privatization is well under way, the value of the ruble has been deteriorating. At the same time, there are many pockets of prosperity in the country, and under former President Vladimir Putin positive efforts were made to bolster the economy with some tangible results.
By 2012, Russia's GDP has reached $2.1 trillion, which is a lot more than the $1.75 trillion of 2006. Russia's privatization and liberalization program has attracted substantial foreign investment. One MNC that has been extremely interested in the country is Earth, Inc (EI), an internationally established farm-implement company headquartered in Birmingham, Alabama with wholly owned subsidiaries in Germany and Italy. EI entered into an agreement with the Russian government to setup operations near Moscow in a factory that was operating at about one-half of capacity. The operation of the factory will be fully owned and controlled by EI. The factory will produce farm implements for the newly emerging Eastern European market. Farm Implements are accessories which are being pulled by working animals or mounted to machineries used on a farm to help with farming. EI will supply the technical know-how and product design as well as assume responsibility for marketing the products. The Russian plant will build the equipment and package it for shipping.
The management of the plant operation will be handled on a joint basis. EI will send a team of five management and technical personnel from the United States to the Russian factory site for a period of 12 to 18 months. After this time, EI hopes to send three of them home, and the two who remain will continue to provide ongoing assistance. At the same time, EI intends to hire four middle-level managers and eight first-level supervisors from Italy and Germany, because the operation will need Europeans who are more familiar with doing manufacturing in this part of the world. Very few locals have inspired EI with confidence that they can get the job done. However, over a two-year period, EI intends to replace the third-country nationals with trained local managers. "We need to staff the management ranks with knowledgeable, experienced people." The CEO explained, "at least until we get the operation up and running successfully with our own people. Then we can turn more and more of the operation over to local management and run the plant with just a handful of headquarters people on-site."
This arrangement has been agreed to by the Russian government, and EI currently is identifying and recruiting managers both in the United States and in Europe. Initially, the firm thought that this would be a fairly simple process, but screening and selecting are taking much longer than anticipated. Nevertheless, EI hopes to have the plant operating within 12 months.
a. Determine the entry strategy used by Earth Inc (EI). List two (2) statements from the case to support your entry strategy.
b. Establish the name of the home, host and third countries in the case. Deduce the number of Earth Inc (EI) expatriates in the factory at the end of
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