How to build sustainable business relationships in a dynamic environment - The case of Electrolux in Russia

Abstract

During the 1990s great changes have occurred in Russia. The economy is gradually transforming to a market economy and the country experienced a financial crisis in August 1998. This volatile environment that characterises Russia gives rise to the importance of forming sustainable business relationships to cope with unpredictable changes and to be able to decrease the degree of uncertainty.

With this background, the aim with this thesis is to explore if it is possible for a Western Multinational Company (MNC) to build sustainable relationships in such a dynamic environment and how this can be conducted. To fulfil the purpose, a theoretical framework was developed consisting of the Institutional approach, the Network approach and the Interaction approach. To get a deeper understanding of the country culture, Trompenaars seven dimensions of how to analyse a culture was applied.

The case company in the study is Electrolux, which operates in the Russian consumer durable appliances market. The focus has been directed towards the distribution network and how Electrolux manages the business relationships within it. The empirical data was collected through secondary data and by interviews conducted in Moscow and St. Petersburg, Russia.

The conclusion drawn is that personal relationships based on mutual trust are the key factors when building sustainable business relationships in Russia, as the legal system is inadequate and unsupportive if violations of agreements occur. Time has to be devoted to form these relationships and it is important to meet face-to-face frequently. A Western MNC has to add value to the business relationships immediately; both on the company and individual level, while at the same time demonstrate long-term commitment to the relationships.