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NATIONAL RESEARCH UNIVERSITY

HIGHER SCHOOL OF ECONOMICS

FACULTY OF WORLD ECONOMY AND INTERNATIONAL AFFAIRS

MASTER OF INTERNATIONAL BUSINESS PROGRAM

Master thesis

Factors Affecting Internationalization Strategy Choice in the Telecom Industry Exemplified by Companies from China, Russia and the United Kingdom

Student: Pavel Virnik

Research advisor: Irina G. Kratko

Moscow 2018

Contents

• strategy internationalization telecommunication
• Introduction
• 1. Theoretical Aspects of internationalization strategy choice
• 1.1 Internationalization strategies
• 1.2 Factors affecting the choice of the strategy
• 1.3 Review of existing research papers on internationalization strategy choice in the telecom industry
• 2. Analytical part
• 2.1 Case study of China Mobile
• 2.2 Case study of Veon
• 2.3 Case study of Vodafone
• 3. Results and Applicability
• 3.1 Research findings
• 3.2 Limitations and further research
• Conclusion
• REFERENCES
• 

Introduction

Nowadays some developed markets are oversaturated with products and services. Tough competition among current players inside motherlands push companies to figure out ways of how to deliver value to their stakeholders. The bravest companies choose the internationalization path of their further development in order to meet customers demand in the foreign markets and fetch the highest value back to their shareholders. However, it is not ease to capture new promising opportunities abroad by just entering new countries. The problem of selection and decision making comes into play. This master thesis strives to shed some light on the issue of choosing the right internationalization strategy taking into account the factors affecting the pick.

The particular interest of the study lies in exploration of internationalization ways of companies from technological sectors. We live in the era of fast digitalization and development of online services and the telecommunication industry is turning into the core basic element of the ongoing processes. Such companies as Uber would not have existed without a wide and deep penetration of mobile Internet. The telecommunication sector from China, Russia and the United Kingdom represent the most developed companies in terms of revenue from foreign operations and countries of international presence that might be a useful example for providing a complex research on the given topic.

Nowadays the topic of internationalization strategies becomes crucial as more foreign companies strive to expand their operations abroad. The problem of choice of internationalization strategy that suits best all corporate goals and objectives appears to be significant.

Having scanned the existing papers on the topic it can be said that there are not many literatures that are devoted to the entry mode choice of companies from the telecommunication sectors. The master thesis aims to add a certain variety to the research of the global telecommunication industry in terms of internationalization based on different factors affecting the strategy selection.

The Object of this paper is the scope of internationalization strategies.

The Subject is different factors determining the strategy choice in the telecommunication industry.

The Purpose is to compare key factors influencing entry mode choice exploited by leading telecommunication companies from different countries.

The methodology of the paper is based on case studies of China Mobile, Veon and Vodafone.

The master thesis paper consists of three main chapters: theoretical aspects, analytical part, results and applicability of the findings.

The Theoretical part is divided into three subchapters. The first subchapter covers main internationalization strategies, their brief description, straights and weaknesses. The second subchapter takes a glance at different factors affecting the choice of entry mode. The third subchapter examines existing research papers and articles devoted to the telecommunication industry. This subchapter also explains internationalization peculiarities of the telecommunication industry, main expansion drivers and entry strategies that are most frequently exploited.

The Analytical part focuses on the case study of China Mobile, Veon and Vodafone and describes the main internationalization strategies, key countries of presence and analysis of factors influencing the strategy selection.

The Results and Applicability provides the findings of the case studies and explanation of the internationalization choice.

Overall the master thesis explores different entry strategies and provides a set of factors that should be attentively considered while selecting the appropriate mode. The cases of China Mobile, Veon and Vodafone provide an interesting example of how companies from different countries from the telecommunication industry capture new business opportunities abroad.

1. Theoretical Aspects of internationalization strategy choice

1.1 Internationalization strategies

Before having a deeper look at the description of existing blocks of internationalization strategies it's vital to give a short definition of the word strategy and how different authors from different fields understand the strategy.

Initially, the word strategy comes from Greek strategos meaning “general” or could be thought over as “the art of the general” (Gray, 1999). The most accurate and sharp definitions of the strategy come from military thinkers. Liddell Hart (1967) describes strategy as a connection between pure objectives, tools and instruments that initiate actions and produce effects. Beaufre (1963) depicts strategy as a constant process of adaptation to permanent changing environment and conditions in the world where opportunities, ambiguity and vagueness prevail.

Colman (2005) shortly describe strategy from the game theory perspective as ways of acting to reach certain outcomes and gain numerical payoffs.

From business point of view, Porter (1996) provides quite a sharp definition of strategy as a choice among different trade-offs. His essential thought can be enunciated and expressed by the phrase: strategy is about relinquishment of different options in favor of the one. The main objective of internationalization for a firm is to elect the right entry strategy that suits its corporate policy, maximizes the effect of operations in foreign markets taking into account all risk factors and stakeholders' objectives. The scope of the strategies is quite high and it may vary from ad-hoc export to greenfield investments. According to the Uppsala model (Johanson and Vahlne, 1977) firms gradually increase their international commitments as their sales abroad increases and their market knowledge grows.

The hierarchical model (Pan and Tse, 2000) divides entry strategies into two large blocks that are named Non-equity mode and Equity mode. The non-equity mode includes such groups of strategies as Export and Contractual Agreements. The equity mode consists of Equity Joint Ventures and Wholly Owned Subsidiary groups.

J. S. Sadaghiani, N. Dehghan and K. Navabi Zand (2011) portrait internationalization strategies into two distinct peculiarities: the first one is the location of production facilities, the second one is the share of ownership in foreign investment.

The authors of the given research paper compiled existing entry strategy modes into three large blocks that are named Trade Strategies, Cooperative strategies and Investment strategies. Each block consists of particular strategies that will be described further. The model is depicted in Picture 1.

Picture 1. Internationalization strategies (Authors' compilation of existing entry strategies).

Trade strategies

Export and import can be classified as a first basic step towards internationalization ladder which was broadly described by Johanson and Vahlne (1977). The strategy of Import and Export can be defined as a finished product or a certain part of finished goods that is produced outside of the market of consumption. (Osland, Taylor and Zou, 2001). Export may be characterized as direct export and indirect export. Indirect export occurs when a firm uses a home distributer to sell its products abroad and the distributer takes all aspects of operations in foreign markets: contacting buyers, logistics, pricing and so forth (Twarowska and Ka?kol, 2013). Johansson (2009) gives a simple definition of indirect export as getting a product to foreign markets via middlemen. According to Li (2004) companies tend to exploit indirect export mode in order to compensate lack of internationalization knowledge or to mitigate country risks by working via intermediaries that might handle all foreign operations and bear risks. Direct export might be applied in case a firm contacts a foreign buyer and controls some marketing and logistics operations by its own (Hollensen, 2007). Grazzi and Tomasi (2016) argue that direct export is likely used by more efficacious companies which already possess some international experience. These companies aim to minimize cooperation with middlemen to reduce costs connected with foreign sales. It can also be said that firms incline toward direct export in cases where they have stable operations at the home market and perceive themselves as global from organizational point of view (Hessels and Terjesen, 2010). Basically, it may be proclaimed that Export and Import are used at the initial stage of internationalization which doesn't require deep commitment to foreign markets, bears low risks, provides tight control over production which most probably leads to lower costs and this mode also helps a firm to learn more about the potential markets. Nonetheless this type of entry strategy has some drawbacks like high trade barriers namely import/export taxes, huge logistics costs, lack of foreign facility can lead to constant out of stock issues due to changes in demand (Ofili, 2016).

In summary both exemplified types of export and import occur on the earlier stages of internationalization, require almost no resource commitments and can be classified as less risky approaches of penetration into foreign markets.

Osland, Taylor and Zou (2001) define Licensing as a non-equity mode that creates a business relationship with one or more indigenous firms. Licensing is an entry mode that gives the second part the rights to utilize intellectual property such as brand names, unique technologies, sales techniques and so forth in exchange of royalty or fixed payments. To a certain extant this form of entry strategy may be described as the export of intangibles (Czinkota, Ronkainen and Moffett, 2011). Franchising is a more advanced form of licensing where a franchiser can provide not only intellectual property but unique machinery, advertising support, assess to common customer databases and so on (Johansson, 2009). Erramilli, Agarwal and Dev (2002) argue that franchising strives to engage a strong local partner who leads the whole system of suppliers, labor, local authorities, customers and consumers and other actors. Turnkey contracts are the form where the seller builds, for instance, production facilities from the ground and provides trained personal who are capable to run the facility according to the proclaimed standards (Vassileva and Nikolov, 2016). Contract manufacturing or outsourcing could be exemplified by a firm that gives an order to a manufacturing company to produce a certain batch of goods by the firm's technology and brand name (Johansson, 2009). Generally speaking, Contract manufacturing is a type of outsourcing where a firm can use foreign production capacities to produce its own goods (Hollensen, 2007). In the case of licensing, franchising, turnkey contracts and outsourcing firms do not need to own foreign plants which require neither huge investments nor high commitments, all risks and constrictions bear the licensee. Firms also mitigate risks and uncertainties that are tied up with trade policies, cross border taxation and other political issues. Another important point is that companies may watch over the situation in foreign markets where the licensee operates and gather vital knowledge regarding foreign country market specifics. The weak point of this strategy could be little control of licensee which might lead to brand image deterioration. (Ofili, 2016)

In several words, licensing provides the easiest way to penetrate into foreign markets without almost any investments and commitments from the firm, however this sort of strategy bears a significant risk in the long run prospective - it might grow potential competitors in foreign markets which would not only compete abroad but could attack the positions of the firm at the home market (Twarowska and Ka?kol, 2013).

Cooperative strategies

Strategic alliance, according to Czinkota, Ronkainen and Moffett (2011), is a type that allows companies from one or different industries share their costs by using cooperation and partnership. Strategic alliance can also be considered as the collaboration among companies to share value and knowledge (Johansson, 2009). The instances of such cooperation might be joint research and development programs, usage of mutual sales channels, utilization of production facilities and so forth. Strategic alliances as a contractual form of internationalization often appear among companies that have a tendency to increase their knowledge capabilities and invent some new fundamental technologies that they could not obtain by researching and developing separately. That means the desire to work on R&D and different sorts of knowledge creation pushes firms toward the contractual mode (Wen and Chuang, 2010). Another way of cooperation is Joint ventures that can be defined as a mode that brings two or more companies together to establish a completely new entity to share capital, risks and knowledge for mutual benefits (Osland, Taylor and Zou, 2001). In this mode two or more companies invest in a new entity to create a production facility for mutual usage (Johansson, 2009). Joint Ventures help establish closer relationships with indigenous government and other social organizations such as labor unions simultaneously this sort of entry mode mitigates risks which are connected with exposing capital and maximizes capital investment usage. (Sadaghiani, Dehghan and Navabi Zand, 2011). Alvarez (2005) shows that companies tend to pick Joint venture mode in cases the firms need to share political and economic risks with possible partners, to attract capital for foreign investments and to gain country specific knowledge from future partners. Cooperative strategies possess certain advantages such as investment risk allocation with foreign partners, knowledge and resource swaps, firms obtain a certain control over new established ventures. Weakness of the mode might lay in the process of selecting the right partner as well as imitation and future disagreements issue (Ofili, 2016). The benefits of this approach obviously lay in the cost allocation among companies taking part in the joint venture but the drawbacks of this type of entry mode could lead to potential conflicts in the field of managing the new joint enterprise. Alcantara and Hoshino (2010) delineate the fact that firms often tend to establish a Joint Venture in order to obtain some knowledge and experience from the partnering firm. In case one company reached those goals it starts reducing its performance and acting less enthusiastically in the new established entity.

Investment strategies

The OLI theory is based on three main advantages that allow firms to maximize the gain of internationalization: ownership advantage, location advantage and internalization advantage (Dunning, 1980). According to these three pillars companies derive the following: ownership advantage allows the companies to take full control over a foreign production, location advantage helps speed up the learning process and adopt to local customer needs quickly, internalization advantage mitigate potential issues with coping and duplicating from the competitor side as the firms keep the unique business know-how inside themselves.

The definition of wholly owned manufacturing subsidiary (Osland, Taylor and Zou, 2001) is to commit a certain level of recourses to a foreign country in order to organize production facility. Hollensen (2007) describes wholly owned manufacturing subsidiary as an opportunity to produce goods in a foreign country. This strategy can be described as a pure FDI. The entry mode can be used in two ways, the first one is to acquire an existing production plant in the chosen country (Brownfield investments), the second way is to build a new facility from the ground (Greenfield investments). Demirbag, Tatoglu and Glaister (2008) shed some light to the fact that a firm more likely to employ a greenfield mode of operations over a brownfield one in case of high investment risks of targeted countries and choose the brownfield mode versus greenfield if a significant market growth is expected. The benefits of own production are fastest response for changing consumer demand, tariff and custom fees reduction and access to local suppliers, but this type of entry strategy carries the highest risks and resource commitments from the entering firm (Johansson, 2009). Kotabe and Helsen (2010) point at several risks that are tied up with M&A strategy such as differences in corporate culture, management style, old production facilities and brand names that could be wrong positioned. The brownfield type of entry strategy allows companies fast access to local market, less time to start operations as well as taking control over operations and firms' knowledge. Disadvantages are tied up with difficulties of adapting the new acquired assets into the corporate culture and hidden aspects of the acquired assets. The greenfield mode mitigates risks of overpaying for the foreign assets and eliminate the integration issue. However, this mode takes much longer time to begin operations, requires much higher knowledge about the target market and much more commitment into the foreign country (Ofili, 2016).

Internal factors

Internal factors are controllable by a firm that plans to expand its sales abroad. The description of these factors is given below:

Objectives & policies - Company's internal objectives, policies and aspirations are the main factors influencing the choice of entry strategy. Proactive motivations often require firms to choose more resource demanding modes whilst reactive motives push them to utilize more cautious ways of internationalization that can be reactive and defensive in nature. (Kotabe and Helsen, 2010).

Resources - Companies are presented by a compound of resources and capabilities. Resources consist of different asset, organization structures, information and knowledge managed by a company to implement the chosen strategy efficiently and effectively (Barney, 1991). Some theories suggest that the pick of internationalization strategy has to be grounded on certain trade-offs between risks and potential gains. The best strategy is the mode that provides the highest risk-adjusted return on investment but the practice shows that the resources available at firm's disposal are key in opting internationalization mode (Agarwal and Ramaswami, 1992). Brouthers (2002) argues that firms with substantial resources often intent toward equity-mode strategies than small companies with low resource possession. Relatively small sized companies more likely exclude investment entry modes from their internationalization path due to the fact of resource scarcity (Demirbag, Tatoglu and Glaister, 2008).

International experience - According to the revisited Uppsala model (Johanson and Vahlne, 2009) firms gradually increase commitments to the foreign operations and FDI as their knowledge, trust and experience in international involvement grows. It means companies with large international experience may incline to choose riskiest strategies to enter foreign markets. In order to compete successfully in the chosen foreign markets, the firm has to possess multinational experience to produce differentiated products and services and as a result win the competition (Agarwal and Ramaswami, 1992). Individual international experience of key decision makers allows to alleviate risks concerning with transactional costs of opting entry modes as the actors possess necessary skills in negotiation and contracting with foreign businesses and those skills may support to recognize trustworthy partners and mitigate risks of choosing the partnership mode of entry (Zhao, Luo and Suh, 2004). Puck, Holtbrugge and Mohr (2009) argue that international knowledge growth of a firm that practices JV approach to internationalization is connected with foreseeable conversion of the existing JV into wholly owned subsidiary or manufactory. On the other hand, a high level of uncertainty decreases chances of companies to convert existing JVs into WOS.

Business know-how - This factor relates to specific product characteristics or other business know-how of a firm. The Eclectic Theory (Dunning, 1980) shows that when transaction costs are high firms may incline to capitalize the market imperfection and exploit internalization in order to maximize the effect of operations in foreign markets. Chang Kim and Hwang (1992) indicate on the additional specific factor named Tacit Nature of Know-How that means firms incline to internalize unique knowledge and technologies in case these know-hows are tacit, implicit and unstructured in nature. The firm which possesses the know-how could bear significant risks in the long run if it picks the entry modes of sharing the knowledge with foreign firms in case of franchising and licensing and eventually this fact could end up in losing the advantage (Agarwal and Ramaswami, 1992).

External factors

External factors are out of direct control of a firm. The characteristic of external factors is demonstrated below:

Host country market specifics - Ekeledo and Sivakumar (1998) distinguish market potential and market structure as one of the most important factors in connection with the choice of entry strategy. The size of the market and its future potential are crucial elements in opting the entry mode: in order to penetrate small size market firms often lean toward exporting or franchising strategies. The market structure relates to a level of competition in the market. In a high competitive market firms tend to enter by export or licensing modes whilst oligopolistic market pushes firms toward sole ownership in order to obtain a tighter control over operations in the foreign countries. Erramilli, Agarwal and Dev (2002) argue that the higher level of host country development, the lower is a firm tendency to choose a management service contract versus franchising. Demirbag, Tatoglu and Glaister (2008) specify two elements of the host country which should be considered as primary: Ricardian elements that are generally consist of proximity to markets, labor, raw materials and other resources; Environmental elements that are mainly composed of political, economic, infrastructural and legal determinants.

Political and sociocultural - country risks and political stability have a substantial impact on the entry mode. Stability of political and economic environment encourages companies to adapt equity modes while firms strive to utilize forms of export and licensing in countries with unstable political and economic environment (Bedi and Kharbanda, 2014).

Cultural distance is another factor that should be closely considered here. Companies aim to compensate their liability of foreigner with their product, marketing, financial or knowledge advantages. The more host country is far from home country the greater is cultural distance (Johanson & Wiedersheim-Paul, 1975). Another practical characteristic of cultural difference may be distinguished as consumer preferences in the country of entry. The same product could be perceived differently in different countries and this fact may directly impact on performance and sales abroad (Ilheu, 2009).

Trade barriers - Bedi and Kharbanda (2014) argue that trade barriers highly affect the entry mode. If high tariffs on import applied by the host country, it is most likely that firms choose wholly owned subsidiary or joint venture strategies. In the case of government limitations of foreign ownership firms very likely opt licensing or franchising forms as entry modes. Special economic zones, taxation and other governmental preferences project a significant impact on the internationalization strategy choice as well as the location choice in the targeted country (Demirbag, Tatoglu and Glaister, 2008).

Home country market specifics - Ekeledo and Sivakumar (1998) show that a market size and a highly competitive environment in the home country industry have a significant impact on the strategic choice. The instance can be oligopolistic markets where an aggressive move from a firm in one country may provoke an offensive reaction by its competitors in another country and those actions can be resulted in devastating price wars in the global industry. Due to this factor firms tend to gain a certain level of control over foreign operations in order not to ruin their business at home or in other countries of presence.

1.3 Review of existing research papers on internationalization strategy choice in the telecom industry

Table 2. (Authors' composition based on the abovementioned papers)

Having reviewed the research papers on the topic it's worthwhile to point at some omissions in the studies. Namely, the reviewed papers don't consider specific factors influencing the choice of the strategic entry mode in the telecommunication industry of a particular country and it can be said that overall the provided analysis is too broad. That's why we will compare identified factors in 1.2. paragraph with the case studies of China Mobile, Veon and Vodafone. However, it's quite enough for having a general view on the chosen area in the telecommunication industry and can be used to provide a general outlook at the industry.

2. Analytical part

2.1 Case study of China Mobile

Analysis of the strategies

The analysis of China Mobile internationalization pathway shows that the company mostly employed strategic partnership modes with foreign players in order to straighten its operation inside China. Regarding acting outside of the home country China Mobile exploited two different internationalization strategies: Merger & Acquisition in the case of Pakistan and Strategic Alliance with a local company in the example of Thailand.

Table 3. (Authors' composition based on the China Mobile press releases)

Strategic Alliance

China Mobile began the internationalization process via Strategic Alliance with two major international players Vodafone Group and Hewlett-Packard Company, the alliance came to the light in 2002. The new established alliance allowed the companies to create a base for mutual research and development of data services in China as well as creation opportunities for mobile network operators, content providers and online tradesmen. The different aim of this partnership was to originate a unified platform for both operators to optimize the usage of contents and applications (China Mobile Website, 2018). In 2006 China Mobile stepped into a new wave of partnership with such global media giants as News Corporation and STAR Group Limited to reconnoiter new business opportunities in the entertainment area and significantly improve customer satisfaction. The deep partnership allowed the companies to develop, produce and distribute social media networking, music and other interactivity services. This step was aimed at bringing the global convergence of media, internet and telecommunication services (China Mobile Website, 2018). Another wave of strategic cooperation with Vodafone came into play in 2011. Both companies signed an agreement to reinforce cooperation in such important spheres as LTE technology development and promotion, improving management capabilities, multinational customer satisfaction, joint Research & Development programs and so forth (China Mobile Website, 2018). 2014 year became a vital milestone for China Mobile as the company entered into strategic partnership with True Corporation PLC that operates mainly in Thailand. This partnership let China Mobile to get access to wider international customer database, improve procurement capabilities and human resources. By implementing this equity based partnership China Mobile acquired 18% of True Corporation and became the second largest shareholder of the company. According to the official press release, the purpose of China Mobile was to acquire more international resources, broader customer database that will allow the company to show better financial performance. (China Mobile Website, 2018).

Joint Venture

A different type of internationalization strategy came into play in 2008 when China Mobile created a Joint Innovation Lab with SOFTBANK and Vodafone. The main goals of the new established lab were to promote the development of modern mobile technologies and services and to speed up the commercialization of mobile applications and other internet services. The companies created the new platform together to drive innovations and to exploit the advantages of merged global customer databases (China Mobile Website, 2018).

Merger & Acquisition

The first Merger & Acquisition deal was done by China Mobile in 2007. The company used that internationalization strategy to enter the Pakistani telecommunication market. China Mobile acquired 88.86% shares of Parktel Limited. By that time Parktel Limited was evaluated by the enterprise value of 460 million USD. This step allowed China mobile to reinforce its position abroad (China Mobile Website, 2018).

Analysis of the factors

The analysis of the internationalization path of China Mobile shows that the company preferred to focus mainly on the expansion inside home country using different types of strategic cooperative strategies to reinforce its business at home.

Internal factors

Having analyzed the internal factors that were presented in the Table 3 it's crucial to mention the factor Objectives & Policies. China Mobile' strategic positioning is about striving to achieve a higher position basically indicates leadership objectives (China Mobile Website, 2018).

The company collocates substantial resources to keep up the growth. At the first year of going abroad the revenue of China Mobile reached 46.9 billion US dollars and EBITDA touched 54,3% (China Mobile Website, 2018).

Currently, China Mobile penetrated two foreign countries and it could be said that the company possesses some international experience (China Mobile Website, 2018).

External factors

Taking a glance at the host country market specifics factor it's important to mention that China Mobile picked countries with relatively large population and high GDP growth. In the case of Pakistan the mobile cellular subscription rate was lower than 50% which indicated of big potential of the market and in the case of Thailand China Mobile entered a quite saturated market with the rate of more than 100% (China Mobile Website, 2018).

Speaking about Political & Social factors it may be said that China Mobile started internationalization with relatively neighboring countries China Mobile Website, 2018).

Nonetheless the home market landscape is oligopolistic the internal market was enormously huge and provided place for internal growth, even in 2014 the mobile cellular subscription rate was only close to 95%. Mr. Wang Xiaochu, China Mobile's Chairman and CEO shared his views of the development of the company in 2003, he said that the company would be focused mainly in the China market as the market has enormous potential in terms of scope and scale and grows with a speed much higher than any other regions in the world. By that time China already became the world's largest market in the world (China Mobile Website, 2018).

Table 4. (Authors' composition based on China Mobile press releases, Worldbank data, OECD data, Doing business data, China Mobile financial statements).

2.2 Case study of Veon

Veon (Vimpelcom) was originated in Russia in 1990 by a group of Russian engineers. Nowadays Veon (Vimpelcom) has become a global telecommunication and technological company with more than 20 years business history and headquartered in Amsterdam. The company is presented in 13 markets under different brands and connects more than 200 million people by different telecommunication ways encompassing voice, fixed broadband, data and digital services. The countries of presence are Russia, Italy, Algeria, Pakistan, Uzbekistan, Kazakhstan, Ukraine, Bangladesh, Kyrgyzstan, Tajikistan, Armenia, Georgia, and Laos. Vimpelcom runs its business under different brands such as Beeline, Jazz, Wind, Banglalink, Djezzy and Kyivstar. The overall revenue of the company reached 8,8 billion USD in 2016. The main focus of Veon (Vimpelcom) is to drive digitalization processes and become the number 1 or strong number 2 player in each market of presence. Veon (Vimpelcom) is a public company listed in NASDAQ under the symbol VIP. (Vimpelcom Website, 2017).

Analysis of the strategies

Veon (Vimpelcom) began its international expansion as the Russian market showed a sign of reaching its potential. The starting point of internationalization was former USSR countries that are close to the home country from the psychic distance point of view as there are many Russians living in new independent states (Annushkina, 2014).