Building a Competitive Strategy for the
Sustainable Growth of a Trading Company
—— A Case Study
Department of Industrial and Management Engineering
Pohang University of Science and Technology
A thesis submitted to the faculty of Pohang University of Science
and Technology in partial fulfillment of the requirements for the
degree of Master of Science in the Department of Industrial
Management and Engineering (Business Strategy).
June 18, 2008
MMIE Yanyan Qu Building A Competitive Strategy for the Sustainable
20062548 Growth of AA Trading Company—— A Case Study 무역 회사의
지속적 성장을 위한 경쟁 전략 수립에 대한 연구 Department
of Industrial Management and Engineering, 2008, 32P, Advisor:
Hyunbo Cho. Text in English.
A research on business strategy is more attractive in recent years. Today’s
companies all over the world recognize that the establishment of an appropriate
business strategy plays an important role in success in the globalized business
environment. China and Russia share a long business history, and the current
business environment between the two countries is favorable. However, there are
some problems commonly faced by companies in both countries. In this research,
we take a typical Chinese company as an example. It is a small-medium size
enterprises, which has been engaged in Sino-Russian business for two decades.
Based on analyzing both internal and external environment of the company from
four perspectives, we established competitive strategies necessary to the company
to achieve sustainable growth in the future.
Keywords: Business strategy, Sino-Russian business, sustainable growth
TABLE OF CONTENTS
1.1. Background ...................................................................................................5
1.2. Problem Statements ......................................................................................6
1.3. Outline of target enterprises in this project.............................................9
2. Literature Review .............................................................................................12
3. Method ..............................................................................................................14
3.1. The reason for adopting SWOT analysis ...............................................14
3.2. Process of extracting strategies................................................................16
3.3. Result of SWOT analysis.........................................................................19
4.1. The intention of qualifier-order winner Table........................................21
4.2. Process of building a qualifier-order winner Table...............................22
4.3. Implications from Qualifier-Order winner Table....................................23
5. Analysis ............................................................................................................29
5.1. Current advantage ......................................................................................29
5.2. Problems statements ..................................................................................29
5.3. Future strategy focus.................................................................................29
6. Conclusion ........................................................................................................33
6.1. Strategies focus on customers..................................................................33
6.2. Strategies focus on suppliers....................................................................34
LIST OF TABLES
Table. 1 SWOT table and its utilization ....................................................................... 15
Table. 2 SWOT analysis results of target project ........................................................ 20
Table. 3 Qualifier-Order winner Table analysis on products types ............................ 26
Table. 4 Qualifier-Order winner Table analysis on customer types ........................... 27
Table. 5 Qualifier-Order winner Table analysis on customer areas ........................... 28
LIST OF FIGURES
Fig. 1 Business framework of target company........................................................... 10
Fig. 2 Sketch map of target project process .............................................................. 11
China and Russia share a long business history. China and Russia are in
geography neighborhood, and there is a highly complementary of economies
between the two countries. Since 1990s, the business relationship between the two
countries experienced with a fast growing process, from barter trade, active border
trade activities, to fast expanded and deepened areas of business cooperation, and
therefore business activities are increasingly standardized. From the year 2001 up
to the present, Sino-Russian business cooperation has developed rapidly, annual
increase rate kept over 30%.
However, the total trade is still not that great. In this case, there remained a huge
potential vacuum of bilateral economic and business cooperation to be released.
The economic and business cooperation between China and Russia lags behind
their political development. Political influence and depth-interdependently
economic relationship between the two countries predestined the wide range of
potential business expansion. Regular inter-governmental meeting, multi-sectoral
collaboration, that provide extensive maintenance and support to expand
economic cooperation. The embranchment of regular inter-governmental
meeting contains various domains, including energy, trade, science, technology,
transportation, nuclear energy, banking, aerospace, communications,
environmental protection and civil aviation technology, etc. The Presidents of
both China and Russia initiated national theme years in 2005, “Year of Russia to
China” in 2006 and “Year of China to Russia” in 2007. The “national year”
enhanced the friendship for generations between the two peoples, promoted the
understanding one another, push forward the strategic partnership of coordination,
boosted mutual beneficial cooperation in various fields, and what is more to
enhance mutual trust and desire of cooperation among corporations in both
The current environment of business between China and Russia is favorable. The
volume of bilateral trade between China and Russia received continuous growth
in the past eight years，business structure kept improving and grow into diversity.
Simultaneously, investment and tech-collaboration also made great progress.
Between China and Russia, bilateral economic and trade relations have entered a
sustainable and mature stage of development. In the 2007 Sino-Russian high-level
meeting by both sides’ Ministry of Commerce, an agreement is achieved, which
resulted in accelerating the expansion of mechanical and electrical products
business, and in the extension of investment and cooperation among small-middle
sized corporation. The agreement also enabled to continue to regulate bilateral
business system, consummate early-warning and consultation mechanism of
sensitive goods, and safeguard the sustainably healthy development of bilateral
1.2. Problem Statements
Business cooperation between China and Russia covers wide scope of industrial
sections, from light industry to heavy industry. The main Chinese participants of
Sino-Russia international trade are small-medium size corporations, most of
whom are located in the three south-east provinces in China. Although numerous
Chinese SMEs are engaged in different industrial scopes of international business
with Russian enterprises, they are facing some common problems.
First, customer may run away to find competitors as new cooperators. In the past
two decades, more and more Russian corporations have better understood Chinese
enterprises and markets by practicing bilateral business activities. Products from
Europe, America and other Asian countries have affected Chinese products’
market share in Russian market. Because of the huge and comprehensive
requirement of civilian industrial and light industry products, Russian enterprises
not only expanded cooperation with Chinese enterprises, but also looked for
partners in other countries world widely. Although Chinese companies have
geographical advantage in carrying out international business with Russian
enterprises, Russian people are requiring higher level of scientific and
technological content in products, so that in Russian market, products from China
are being impacted by the products of higher technological level from Europe,
America, Japan and S. Korea.
Second, suppliers tend to do business with customers directly. According to the
agreements achieved on the seventh Sino-Russian Prime Minister regular meeting,
on 22nd September 2004, “Sino-Russian economic and trade cooperation network”
officially opened under the collaboration of Chinese Ministry of Commerce and
the Ministry of Russian economic and trade. “Sino-Russian economic and trade
cooperation network” is an official network, whose purpose is to promote the
development of bilateral economic and trade cooperation, and to provide service
for enterprises, research organizations, and governments of both countries. It
contains dynamics of both China and Russian, the mechanism of Prime Minister
regular meeting between both the countries, Sino-Russian business and
investment, and bilateral economic and trade domains, such as economic and
technological cooperation, enterprises and products. The “Sino-Russian economic
and trade cooperation network” provides numerous Chinese enterprises, who were
not aware of Russia, with a chance of gaining a better understand of Russian
market, simultaneously, and founding multiplicative approaches to enter into
Russian market. Although these new comers have just begun to set up their sales
net works in Russia, yet relay only on relatively preferential prices, they have
already had a great impact on those business firms who have already carried out
their business in Russian market for over 20 years. Some manufactures even built
up direct-sales-agent relationship in many cities across Russia, what further
limited the territory of business firms. Expositions held by both countries are
involving more and more industrial domains, at an increasing frequency. In this
case, it provides a wide range of platforms for manufactures and final purchasers
from both countries to establish direct connection and cooperation.
Third, we have payment problems from Russian customers. Because of some
Russian enterprises’ inherited inherent problems, and some political provisions of
Russian government in economic and business scope, there is a huge gap of
efficiency and completeness between the payment of Russian purchasers and the
requirement of Chinese providers.
Fourth, customers require better after sales service. In the past time, the main
body of Sino-Russian business activities from China is trade-oriented enterprises,
which is a decisive factor to limited ability of Chinese firms to provide in time
and upstanding after-sales services to their Russian end users. This has been
particularly conspicuous to machinery and electronic products. Lack of after-sales
services seriously reduced the impression of Chinese products in Russian markets,
and is a grievous limitation of the market share of Chinese products and the
possibility durability of long-term cooperation. The good news is that, no matter
manufacture or trade firms, they have already paid great attention to this issue and
started to carry out corresponding responses and improve the efficiency and
quality of after-sales services.
1.3. Outline of target enterprises in this project
This paper is based on a real case study. In this project, the target company is one
of the small-medium size enterprises, who engage in Sino-Russian business for
two decades. The target company locates in Heilongjiang Province, China. It has
two offices; one in the border city focuses on customs declaration affairs, the other
one in the capital city of the province focuses on business correspondences and
The target company is a multiplex-business organization, its business scope
covers comprehensive industrial domains. It began from trading of logs, timbers
and wood products, and grew into including construction Machines, construction
Material, canned foods, buses and relative accessories. The business model in this
company will be investigated separately from four perspectives, suppliers,
business projects, partners in Russia, and target customers. Business projects there
are operated separately, but in a similar way and analogous process. in Fig 1.1
Profitability of each business project is decided not only by direct profit from
sales but also by tax feedback ratio from the native government. To carry out the
research sticking to the reality, the business of construction machinery of the
target company is taken for detailed analysis, as shown in Fig2.
Our target company has gained reliable and stable advantages in Russian market.
Firstly, its location holds geographical advantage in doing business in Russia as
specified previously. Secondly, in the long-term cooperation practice, they won
solid sales network, reliable customer relationship and customer loyalty in more
than half geographical Russian market by honest and trustworthy performance.
Fig. 1 Business framework of target company
Fig. 2 Sketch map of target project process
The present strategy of our target company is to rely on existing partnerships and
networks in Russia to absorb new end-users, and expand their business. However,
such condition raised the question: What strategy should be built for sustainable
growth of the target company to win the long-term Russian market. The goal of
this thesis is to create multiple strategies aiming to win long term competitive
advantage, based on analyzing business model existing in a small-middle size
company in China.
2. Literature Review
Research of business strategy has received growing interest in recent years.
Recently business decision-making under uncertain environment of target markets
becomes more difficult than before.  It requires business companies to consider
various aspects to judge the situation and make a decision. The aspects include not
only financial aspects, but also organizational growth, competitors’ strategy, latest
technologies, customer satisfaction, and so forth. Business strategy consists of
logical actions for continuously producing enterprise outcome.  It is supported
by well developed skills to carry out repetitive work of inspection and analysis of
various relative issues. Business strategy becomes more and more critical to the
success of cooperate operation and management.
The capability of providing customer value plays a critical role in winning in the
market. In today’s competitive business markets, suppliers are continuously
challenged to anticipate rather than follow changes in customer value.  When
choosing a supplier, customer prefer to those who are innovative and can offer
best value. Customers wanted know-how, support for their activities and
involvement in specialized innovation, and the presentations sought to
communicate precisely suppliers’ specific competence that had been developed to
be in line with that of their customers.  Globalization allows consumers able to
select the supplier to provide the most value among suppliers from all over the
world. It adequately revealed the importance of effective combination of customer
value into the competitive advantage of business.
Researchers and managers’ need attention to consider the profit making strategies
and appropriate activities to be adopted by enterprises engaged in international
business between China and Russia. The business relationship between China and
Russia is internationally important, especially to regional economic development,
cooperation and stability. However, it did not receive enough global concern. In
the past two decades, the development of Sino-Russian economic relationship and
cooperation attracted attention of researchers mainly from China and Russia.
These attentions mostly focused on macro-economics relationship between the
two governments. It is well known that China’s economic is still on the
developing stage, and Russia’s economic system also need to be improved and
developed. It can be said that, compared to European and the United States
relatively mature economy, bilateral cooperation between enterprises from both
countries is on a special stage of development. Actually, most of enterprises from
the two countries are doing business in primary way. They aspire after modern
method to extend their business. Consequently, this research dedicated in
establishing competitive strategies from the Chinese company’s point facing the
competition in Russian market.
3.1. The reason for adopting SWOT analysis
A SWOT analysis is conceptually simple and comprehensive; it can be applied to
many facets of an organization. [1.p93] “SWOT” stands for strengths, weaknesses,
opportunities, and threats. Fig3 SWOT analysis is widely used for evaluating and
analyzing the applicability between an organization’s strategy and its internal
capabilities, which contains strengths and weaknesses, as well as its external
possibilities, which includes opportunities and threats. SWOT analysis is
frequently used as an effective framework for extracting and analyzing enormous
information. It is also an effective method to judge the strategy to the resources of
a firm using strengths to exploit opportunities and protect the firm from possible
internal weakness, and utilizing its strengths to dispute outside threats.
SWOT is broadly considered as a helpful and valuable tool by managers and
analysts. It helps managers to establish strategies to solve key issues by
understanding the environment, in which an enterprise exists and faces, and
isolating the critical factors, the organization’s strategic issues, which are
contained and analyzed according to the four elements in SWOT table. A strategic
issue exists either inside or outside the organization and is likely to have a
prominent and long-term impact on the ability of the enterprise to meet its
competitive objectives. [1.p96] In this way, the strategies established can be able
to better respond to and deal with critical issues, which greatly decide the actual
performance of the enterprise and its potential capabilities.
SWOT not only is an intuitive method, but also redounds to pick out potential
diathesis from existing factors. Placing the issues onto the four-quadrant grid,
relevant strategic issues are identified. Managers and analysts can concisely
review the enterprise’s inherent strengths and weaknesses, as well as external
opportunities and threats. In fact, during the SWOT analysis process, we can
usually find out some information hidden before, as well. These information
includes technologies, market trends, and new competitors, that were previously
neglected but important. Such function of SWOT analysis effectually helpful to
avoid managers’ experiential judgement and determination.
Table. 1 SWOT table and its utilization
Opportunities Differentiation Strategy Positive Strategy
Negative Strategy or
Threats Gradual Strategy
The inherent advantages of SWOT analysis determined that it can be used in this
case study. Firstly, SWOT provides a wide capability to be applied by both
managers and analysts for various objects, including organizations, projects,
products, services, corporations, even market segmentation. Secondly, financial or
computational resources are required very low in the SWOT analysis process.
SWOT focus on strategic issues, which have important and critical impact on the
corporations’ actual performance. The third inherent advantage is that it is
effectively helpful for firms to achieve necessary changes by reorganizing their
resources and combining advantages from different internal functions, such as
marketing, manufacturing, financing, and so on. Finally, SWOT analysis can
clearly identify the organization’s core competences in current situation with its
capabilities and resources. Reasonably integrating these factors effectively
promotes the organization to future success.
The process of designing business strategy for the target company requires SWOT
analysis. To design a business strategy initially requires collecting dynamic
information from both inside and outside the company, including the condition of
society, industry, market, pulse of competitors, new requirements from customers,
internal actuality of resources, etc. An effective strategy should be made based on
analyzing these information, and be able to be extracted with potential capabilities
of company to perform efficiently in response to the challenges. Adopting SWOT
for analysis, analysts or managers may clearly figure out the company’s situation
and profitable direction by positioning the grasped dynamic information in the
right quadrant in SWOT table.
The business environment of the target company is special. Information is
increasingly large and diversified in these days, and to analysis business condition
in an uncertain market environment is a complex and difficult work. The business
environment of both countries, China and Russia, are under developing, and their
economics system and mechanism are expected to be consummated. Such
complex environment requests a flexible analyzing tool. SWOT analysis is
frequently considered as an effective framework for extracting information.
3.2. Process of extracting strategies
To utilize SWOT analysis for extracting strategies for target company, the process
is divided into three steps, data collection, factors diversification, and strategy
constitution. The methodology used to gather and interpret this information should
be an interrelated, iterative, and reinforcing process of consultation with
executives and functional experts, team discussions, and competitive intelligence.
Various methods are adopted to collect dynamic information and relative data
from different perspectives of the company’s whole business chain. We appointed
interviews with managers from the company for the internal current situation. We
also carried out mail surveys and phone interviews with their domestic suppliers
and Russian partners for future trend from the viewpoint of the last tache and the
next tache in the target company’s business chain. To further investigate
customers’ opinion, anonymous surveys for requirements are done by some of end
customers under the help of Russian partners. Simultaneously, to acquaint
ourselves with actualities of market and international business conditions, we
referred to report from “Sino-Russian economic and trade cooperation network”.
These efforts are repetitiously done for instant information during analysis process.
Subsequently, we dedicated to categorize gathered information into strengths,
weaknesses, opportunities and threats. By investigating the internal environment
and inherent factors, we can find out strength and weakness. The company locates
in the capital city of the northeast-most province in China, which has both
geographical advantage in doing international business with Russia and
convenient environment for domestic business. They have long-term and
abundant experiences in international business, and understand the Russian
market and culture very well. So that they could predict the future requirement
two or three months before the actual order, which greatly shortened the delivery
term and made the company win more and more new customers. In the two-
decades-long cooperation, a reliable and flexible network in Russia was establish
and well managed. They are able to convey customer’s requirements to suppliers
efficiently in several hours. A large group of distinct types of products can be
provided by the company. Due to the well conducted relationship with domestic
suppliers and hard work of driver-and-operators employed, the company could
achieve to export products in 7-10 days after manufacture in the normal weather
condition. Such short period is attractive to end customers. However, because the
profit is mostly from the customs tax rebate and it usually takes 3-6 months long,
the company’s cash flow cycle is long.
To find out opportunities and threats from external environment, we have to go
deep into actual market condition. In recent decades, because of reasonable prices,
geographical advantages, and favorable political relationship, products from
China have occupied over half of civilian industry markets and light industry
markets. However, Chinese companies are facing higher competition in Russian
market. More and more competitors from Europe, America and other Asian
countries entered Russia. For the machinery market, these competitors are
attracting consumers with higher-level technology. At the same time, they
managed to provide better and more reasonable prices by various possible means
to win customers and market share in Russian market.
Despite of new competitors, suppliers from native country tend to touch end
consumers directly. Affected by the expanding influence of “Sino-Russian
economic and trade cooperation network”, numerous manufactures are attempting
to attract buyers in Russian market to shorten the distribution chain. As Russian
do not easily change partners, manufactures tend to win customer’s trust by
multiple channels, such as advertisements, fairs, local chamber of commerce, etc.
Based on these factors, some customers tend to contact manufactures for better
prices and other benefits. Leastwise, at present and near future term, it seems that
the established strong distribution network and long-term cooperation are decisive
factors for Chinese business firms, including our target company, to win
consumers and market share in Russian market. Simultaneously, end users in
Russia are no longer simply satisfied with reasonable prices, they are further
requiring better after sales services regarding efficiency and effectiveness. They
more and more prefer to choose providers who are able to provide timely,
effective and reliable after-sales services.
3.3. Result of SWOT analysis
Based on strategic issues extracted above, it is obvious fill these factors in to
SWOT table distinguished by strengths, weakness, opportunities and threats. The
categorization is as follow and shown in table 2.
Strength: geographical advantage, abundant experiences of international business,
know Russian market and Russian culture very well, could predict future
requirement, quick response to customer requirements, short term and flexible
delivery, reliable and flexible network in Russia, well managed partner-
relationship with Russian partners.
Weakness: drawback period is long, cash flow cycle is long.
Opportunity: customer loyalty, market share, remained large requirement amount.
Threats: competitors from other countries are providing products with cheaper
price and higher quality, suppliers tend to connect end users directly, customers
require high-quality after-sales services.
Table. 2 SWOT analysis results of target project
1.geographical advantage, 1.drawback period is long,
2.abundant experiences of 2.cash flow cycle is long.
3.know Russian market and
Russian culture very well,
4.could predict future
5.quick response to customer
6.short term and flexible
7.reliable and flexible
network in Russia,
8.well managed partner-
relationship with Russian
1.customer loyalty, Differentiation Strategy
2.market share, (internal strengths matched
relative to external
3.remaining large with external opportunities)
other countries are
providing products with
cheaper price and Negative Strategy or
higher quality, Withdrawal
2.suppliers tend to (internal strengths matched
relative to external threats)
connect end users with external threats)
Base on the result of SWOT analysis, the indication is obvious. The external
environment of the company is complex, meanwhile, opportunities and threats
seem equal to each other. Although market conditions look competitive, the target
company has inherent strengths to respond to future competition. To determine the
strategic fit, the analyst should predict the firm’s performance going forward, such
as articulate the firm’s performance several years in the future if no changes are
made to its strategy, and its internal and external environments do not change. In
order to establish effective future strategies, we identified qualifiers and order
winners, which are critical for successful performance in winning future
4.1. The intention of qualifier-order winner Table
A qualifier-order winner Table is an effective analysis tool to determine future
strategic focus. Its analysis results in strategic issues, which are inherent and
critical to the enterprise itself. It also divides products, markets segmentation, and
customers into different groups in allusion to their characters and analysis
requirements. To carry out qualifier-Order winner analysis is to establish a form of
strategic issues integrating different groups of products or customer, and weight
each one. The strategic issues are measured as order winners, which are given in
percentage referring to their importance in affecting each group, and qualifiers,
which are given in Q (not sensitive to customer) and QQ (sensitive to customer).
Managers and analysts can find the future strategic focus and improvement
direction by measuring and weighting each inherent strategic issue. Consequently,
we can clarify essential factors to the company’s successful business operation.
4.2. Process of building a qualifier-order winner Table
Data for weighting strategic issues are collected from multiple sources. We utilize
some information in SWOT analysis, including information from interviews with
managers, email surveys and phone interviews with customers. We also collected
data from sales report and feedbacks from partners’ sales network in Russia.
From the collected information, we coordinated eleven critical factors, which
affect the success of target company’s construction machinery business. These
factors are product image, performance and functions, price, period of payment
close, percentage of advance payment, delivery terms, seasonal factors, network
capabilities, government policies, maintenance period, and after sales services. We
take above critical factors as analysis criteria in qualifier-order winner table.
We setup three tables to analyze separately focusing on different product group
and customer groups, indicating the current status and trend in Russian market.
They cover a 5-year period, including sales condition in the year 2007 and 2008,
and forecast of the near future from the year 2009 to 2011. The first table is
formed under purchase of different product types to compare the effect of each
criteria. (Table 3) Accordingly, product types are distinguished by capabilities,
that is to say products in type A have the capability of no more than 50 ton, while
product capability in type B is between 50 ton and 100 ton, and it ranges between
100 ton and 200 ton in product type C. Secondly, we focused on the impact of
each criteria on end-users and non-end-users. (Table 4) Finally, table 5 compares
the impact of criteria on customers from large cities and small cities. (Table 4.3)
4.3. Implications from Qualifier-Order winner Table
To extract how criteria affect customers’ purchasing behavior for each product
type, we focus on the first table. The effect of price, payment close time and
government policies change gently in the five-year period. It is interesting that the
larger the product capability is, the less product performance affects, while
product image gradually becomes sensitive. Although advance payment is
concerned by all groups, yet its impress does not change distinctly when 50%
payment is required in advance. In contrast, when the percentage of advance
payment is 70%, it becomes very sensitive to purchasing decision making for
product with capability of no more than 50 ton. There are two other criteria,
seasonal factors and sales network, affect only to the business of large capability
product types. In Russian market, the concentration of delivery speed seems
decreases gradually. However, customers consider more about maintenance period
and after sales service when they purchase construction machinery from China.
Referring to the second table, it is obvious to notice the trend of criteria’s
influence on end-users and non-end-users. Both two groups of customers are
increasingly concern on product image, while it changes gently to product
performance. Price is always the most sensitive factor to customers. The effect of
advance payment of customers does not change distinctly when it is 50%. What
needs to be noticed is 70% advance payment is sensitive to end-users. It seems
that both end-users and non-end-users do not care a lot about delivery speed.
Seasonal factors and sales network affect obviously to end users, and policy
affects obviously to non-end-users. It is similar with the result of first table, that
maintenance period and after sales service become much more important than
ever before to both end-users and non-end-users. The importance of after sales
service seems will increase even faster to end-users in recent years.
The last table provides the five-year trend of criteria’s impact on purchasing
decisions by customers from large cities and small cities. Product image and
product performance attract more attention of customers in large cities. This group
of customers is very sensitive only to government policies. The effect of price and
advance payment at 50% is gently sensitive to both groups. Customers in small
cities appear to be very sensitive to payment close time and advance payment at
70%. Simultaneously, they are also influenced a lot by seasonal factors, sales
network and maintenance period. And they will also consider delivery speed.
What worth our attention is that after sales service receives increased
concentration by all customers, and it is crucial to customers in small cities.
According to the above implication, it is not difficult to find out business trend of
construction machinery in the Russian market. First, the quality and efficiency of
after sales service is receiving unprecedented attention by all customers in the
Russian market. This can be a direct result that Chinese enterprises in Sino-
Russian business are only trading companies in recent decade, and they are
usually unable to provide adequate after-sales service. Simultaneously, the
importance of maintenance period increases steadily the five-year period.
Secondly, Customers in small cities are more sensitive, compare to those in large
cities. Based on indications above, it is clear that customers in small cities are
very sensitive not only to 70% advance payment, but also to many other criteria,
such as seasonal factors, sales network, maintenance period, and even will
consider delivery speed, which seems not that important to customers in large
cities. The third trend is that delivery speed seems less attention as time goes by.
In recent years, Russian market considers more about quality, innovative
technology, and adequate after-sales service, rather than how fast they could
receive the product. Normal delivery term can be accepted. Finally, it is unique
that policy affects greatly on business in Russia. This is the legacy of the previous
political system of Russian. However, as Russian government is changing to
consummation of Russian economic and business system, the effect of such
phenomenon can become weaker and gradually disappear.
Table. 3 Qualifier-Order winner Table analysis on products types
Product type A Product type B Product type C
Criteria capability＜ 50t 50t＜capability＜ 100t 100t≤ crane ≤200t
07 08 09 10 11 07 08 09 10 11 07 08 09 10 11
Product image Q 10 10 15 QQ Q 10 10 20 QQ Q Q 10 10 20
Product performance 50 30 20 15 30 30 Q Q 10 20 Q 10 10 20 20
Price Q Q Q 10 20 20 Q Q Q 20 Q 10 Q Q QQ
Payment close time Q 10 10 10 20 10 Q Q 10 QQ 30 Q Q Q 20
Advanced 50% 10 Q 10 Q 10 Q 10 Q Q 10 20 Q Q Q 30
payment 70% QQ QQ QQ QQ QQ QQ 10 Q 10 QQ Q 10 Q 10 QQ
Delivery speed 30 20 20 10 20 30 30 40 20 20 40 40 30 20 Q
Seasonal factors Q Q Q Q Q Q Q Q Q Q Q 10 20 10 Q
Sales network Q Q Q Q Q Q Q Q Q Q Q Q Q 10 10
Policy 10 10 Q Q Q Q 20 20 Q Q 10 20 20 10 Q
Maintenance Period Q 10 10 QQ QQ Q Q Q 10 10 Q Q QQ QQ QQ
After sales service Q 10 20 40 QQ 10 20 30 20 20 Q Q 10 10 Q
Table. 4 Qualifier-Order winner table analysis on customer types
Customer group A Customer group B
Criteria not end user end user
07 08 09 10 11 07 08 09 10 11
Product image Q Q 10 20 20 10 5 10 15 15
Product performance 20 10 15 10 15 10 20 10 10 10
Price 10 Q Q 10 10 QQ 10 10 QQ QQ
Payment close time 10 10 Q Q Q 20 10 Q 15 15
Advanced 50% Q Q Q Q Q 10 Q Q Q 10
payment 70% 10 20 20 10 10 QQ 10 10 QQ QQ
Delivery speed 30 30 30 20 10 10 10 20 10 10
Seasonal factors 10 Q Q Q 10 10 10 10 Q Q
Sales network 10 10 Q Q Q 20 10 10 20 10
Policy Q 10 10 10 Q Q Q Q Q Q
Maintenance Period Q Q Q Q Q 10 5 10 10 10
After sales service Q 10 15 20 25 Q 10 10 20 20
Table. 5 Qualifier-Order winner table analysis on customer areas
Customer group C Customer group D
Criteria large city small city
07 08 09 10 11 07 08 09 10 11
Product image 10 10 15 15 15 10 15 10 5 5
Product performance 20 15 15 20 20 10 15 10 5 5
Price 15 10 Q Q Q Q Q Q Q Q
Payment close time Q Q Q Q Q QQ QQ QQ QQ QQ
Advanced 50% Q Q Q Q Q Q Q Q Q Q
payment 70% 15 15 10 10 10 QQ QQ QQ QQ QQ
Delivery speed 10 20 20 10 10 30 20 20 20 20
Seasonal factors 10 Q Q 10 10 QQ QQ QQ QQ QQ
Sales network Q Q Q Q Q 20 20 30 30 30
Policy 10 20 20 10 10 Q Q Q Q Q
Maintenance Period Q Q Q 5 5 QQ QQ QQ QQ QQ
After sales service 10 10 20 20 20 30 30 30 40 40
5.1. Current advantage
Based on the results from SWOT analysis and qualifier-order winner table, it is
not easy to extract the current situation of both inner and external environment.
In the past two decades, our target company successfully won Russian partners’
trust and their strong sales network. Its good reputation and efficient cooperation
laid a solid foundation for the establishment of extensive and liable partnerships.
Such good standings resulted in its biggest advantage, strong sales network and
customer loyalty in Russia. This is the most important and necessary prerequisite
for Chinese enterprises, which want be engaged in exporting to Russia. This is
also coveted by many manufacturers, who intend to enter Russian market,
whether from China or other countries.
5.2. Problems statements
With such advantages of solid cooperation and strong sales network, the company
needs to consider two issues. One is how to provide better quality products and
services to partners and end-users. Particularly, the after-sales services of
construction machinery and equipment are important. The other is to ensure that
its supply resources are diverse and adequate in channels and quantity. Although
this problem is not serious at present period, it may become the most intractable
issue to threat the target company.
5.3. Future strategy focus
In response to these questions, the target company should explore for potential
force, hiding behind the existing profit, to promote and extend its business.
Typically, the existence of stable profit margins, videlicet the price is greater than
the cost, tend to become a decisive factor when enterprises make a decision on
whether to carry out a project. In today’s business world, profit margins exist in
many projects. But not every enterprise engaged in such project could be
successful and developed. What factor is hidden behind and playing a decisive
It is not difficult to draw a conclusion from the above description of this case.
Customers in Russian market are no longer just satisfied with reasonable prices.
They are more and more concerned about whether the technology advanced, if the
purchased product is innovative or under well-known brands, whether the using
process can be guaranteed, whether timely, effective and credible after-sales
service is available in case of use problems. All these contents consumers consider
are the value they want to obtain through the price they paid for the product. We
call it customer value. It is the summation of customers’ evaluation of the level of
technology leadership, brand recognition, and guarantee of after-sales services.
The estimation of customer value adulterates user’s subjective factors. However,
its footstone is the performance of supplier and product. Suppliers are supposed to
learn about customer value, create it and develop delivery processes . Therefore,
we can claim that the commercial success of the project obtains the authorization
of value by consumers. In other words, customers’ psychological evaluation of the
performance of suppliers and products exceeds the price they paid for purchasing.
To sum up, the establishment of our future strategies must manage to better meet
the customer value. In this way, it will be possible to win a wider range of
customer loyalty, and ensure the stability and extension of market share.
Simultaneously, it provides the possibility of long-term, reliable and successful
development of both business project and enterprise itself.
In addition, to ensure the continuity of the supply chain, a steady supply
relationship must be sustained. As already stated, many Chinese manufacturers are
trying to enter Russian market and directly face customers. There is no doubt
about the more favorable price they can provide. However, the capability of sales
network holds the balance of successful business operation in Russia. The current
reality is that manufacturers did not harvest anticipated good result, although they
made efforts for preparation. For instance, they set up offices in some cities,
advertise by television and internet, participate in relative trade fairs, and even
directly visit potential customers. One main supplier of our target company ranks
within first three of China’s most powerful construction machinery manufacturer.
This supplier set up its sub-office in Moscow, as early as in year 2000, and
established its own marketing company in St. Petersburg. At the same time, it also
sent products to trade fairs in European countries twice a year, carried out
Russian-wide advertisement. However, by the end of 2007, in the eastern region
of Russia where our target company also covers, this manufacture’s average
monthly sales is less than 25% of target company’s, sometimes even 0. This
strange phenomenon perhaps is unique in Russian market. Most Russian
customers prefer to purchase from local dealers at a slightly higher price, rather
than accept direct sales from a foreign retailer. Nevertheless, to establish a
powerful sales network from the very beginning is certainly a difficult mission for
numerous Chinese manufacturers.
For our target company, holding the fatal advantage, what should be kept as the
focus point of future strategies is to make its suppliers realize its strong sales
network and rely to the strength of this network. Meanwhile, if possible, we can
also consider the transformation of the target company to being involved at
manufacturing or being a part of production chain, through combination, mergers,
cooperation, or development. It will drastically achieve the consolidation, stability
and continuity of supply chain.
This paper grasps the current market condition of small-medium sized Chinese
enterprises facing Russian market, based on the research of the business chain of a
representative enterprise. We pointed out current situations and problems of the
target company, and analyzed advantages and threats in competition. In response
to customers’ new requirement, combining characteristics of the target company’s
business chain, we established future strategies focusing on the perspective of
supplier and customer, to support sustainable development of the target company.
6.1. Strategies focus on customers
According to analysis result, the key point of developing a current business is to
make customers believe they can gain most value from our products and services.
Therefore, our target company could win long-term loyalty form all customers.
First, we can provide optional choices for customers with different requirement.
The first example is to provide relative preferential prices for customers who
place an order a long period in advance. Another example is to provide discount
or promise longer maintenance period for customers who close the payment at one
Secondly, we can establish after-sales service centers to provide self-contained,
excellent and timely services to meet customers’ requirement. The postulate of
this strategy is to ensure technical support. We can choose Russian technician,
who have relevant technical experience to join training program in China. It is
also possible to send technical experts from China, to serve for technical support.
Resolving the technical assurance, the guarantee of supply of accessory and
fittings is also a critical requirement. We can arrange quantity and variety of trivial
delivery and storage of spare parts referring to the past experience. The allocation
of after-sales centers is also a problem to be considered. It can be arranged
referring to the convergence of end-users. The logical overall arrangement of
after-sales service centre coverage will effectively provide a guarantee to serve for
customer whenever and wherever they need. Under the present circumstances, this
will play a crucial role in winning new customers and maintain customer
relationships in Russian market.
Thirdly, we can establish multiple channels for communications between
customers and our target company. In addition to the existing methods, like
telephone, email and fax, it is necessary to build up internet-based platforms to
share information with customers. Simultaneously, the target company can have
interview with customer frequently by various means. Through these ways,
product and service providers are able to understand and collect latest customer
demand and dynamics. These efforts not only help to modify sales plan to be more
rational, but also provide more information passages to ensure the efficiency and
quality of after-sales provided.
6.2. Strategies focus on suppliers
To maintain a reliable supply chain running smoothly and efficiently is the
foundation to guarantee the business chain to be operated continuously effectively.
Many manufacturers are trying to directly face Russian customers, and some
already took actions. The target company’s future strategies, which focus on
suppliers, should transfer this passive situation into the initiative.
Firstly, the company should consolidate the existing cooperative relations with
suppliers. The target company holds the precious resource of strong and stable
sales network in Russian market. Even the most powerful native suppler, after
several years of efforts, could not compete with target company’s sales capability.
Consequently, trading enterprises can sign the authorized sales agent contracts
with suppliers utilizing the sales advantage. Under the validity of contracts, trade
companies may obtain a relatively stable channel and quantity of product supply.
However, not all suppliers would accept such authorized sales agent contracts.
The second future strategy against suppliers is to be involved in production by
holding shares of manufacturers’. The mode of involvement may be by funding,
or commitments of sales quantity, or cooperation of development, and so on. Yet,
the objective is to master a fixed quantity of the producer’s annual production
output as the stable supply resource. This strategy manages to acquire a certain
quantity of supply. It may not be able to take the real initiative of stable supply.
The third strategy is to manage to restructure trade enterprises into manufacturers,
by establishing productive segmentation and run self-developed product lines. In
this way, reliable and stable security of supply can be available. Nevertheless, this
also brings a great risk to trade enterprises dedicating in transition. A financial risk
is the biggest one. The investment of construction machinery and equipment at
early stages cost huge capital resources, which is quite different from ordinary
commodity manufacturing. This is usually the key obstacle for trade enterprises in
transition into manufacturers. Even though the enterprise has powerful financial
capability, it also takes a long period of time to develop and produce various types
of products. Different entity has distinguished production capacity and focuses. To
be a restructured enterprise engaged in manufacturing, the success of production
branch operation directly affects the existence and future competitive capability of
the whole enterprise. If financing can be achieved successfully, production
transition is the most effective way to guarantee supply efficiency in the long-term
Finally, it is suggested to explore diversified supply channels. It is possible to
develop supply channels from other countries. Based on the market condition’s
analysis, it should be concluded that products from Europe, the U.S. and other
Asian countries are flowing into Russian market. Yet, the capacity of sales
network restricts products from other countries as well. The character of Russian
market affects on merchandise from all over the world. Therefore, our target
company may utilize its biggest advantage again to absorb product supply from
any other countries, through participating in trade fairs, contact to trade
association, and other available passages. Diversification of supply channels is the
expansion, strength and insurance of enterprise supply resource, no matter how
native manufacturers play in Russian market and cooperate with our target
company, or what condition will be in Russian market.
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（ 商 务 部 副 部 长 : 中 俄 今 年 贸 易 额 有 望 接 近 500 亿 美 元 ） ,
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Trade Is Still Owed”（中俄贸易总量为何不够大，民间自由贸易仍欠活
 “Sino-Russian Economic and Trade Relationship Received Rapid Growth
For Eight Consecutive Years” （中俄经贸关系长足发展 双边贸易连续 8
Since I came to Pohang University of Science and Technology (POSTECH), it has
been two years. In these two years, I led a better life than I anticipated with the
help of my advisor, other professors who give me chance to join their lectures, lab
members and other Korean friends.
First, I would like to give the greatest thanks to my advisor, Prof. Hyunbo Cho.
He is a kind person, always warm hearted to his students. He is an excellent
professor. He acts as not only as my advisor, but also an instructive friend.
Secondly, I would like to thank Prof. Sooyoung Kim, who gave me the chance
to enter POSTECH and introduced me to Prof. Cho. Thirdly, I also would
like to thank all professors who ever helped me, including Prof. Euiho Suh,
Prof. Kwangjae Kim, Prof. Moonyoung Jung, Prof. Heecheon You, Prof. Yeonh
ee Lee, and Prof, Jaeho Lee.
And also, I would also like to thank my lab members. In the past two year,
I received a lot of help from my lab members, who gave their warm-hearted
hands to me not only in study but also in my life in Korea. All
the lab members who should be thanked including Jun Ok Kim, Jeong Kiang
Lee, Tae Jong Yoo, Soon Pyeng Kang, Bu Hwan Jeong, and Jung YubWoo.
Finally, I would like to give my most passionately heartfelt thanks to my
family, my parents and my husband. Their love encouraged me to finish
my master program and face very challenge in my life.