Deadly Sins of International Business Blog

As the Wall Street Journal reports, Dunkin Donuts is returning to Russia. After it has retreated from the market in 1999, the owner of the Dunkin’ Donut brand, Dunkin’ Brands, is planning to open 20 stores in Russia this year. At the time when then owner Allied Domecq decided after only three years in the market that Russia would not work for their brand, there were two Dunkin’ Donut stores in Moscow and three outside. The official reason has been Russia’s economic crisis, but there was also talk about difficult relationships with franchisees (in particular one who sold liquor and meat pies in addition to Dunkin’ products). There may have been at least one more reason – at least according to the Wall Street Journal, Russians aren’t really familiar with donut’s. In recognition of this, Dunkin will be experimenting with scalded cream and raspberry fillings. Plus, this time they are bringing in a lot of Russia expertise – Dunkin’ is teaming with a Russian real-estate developer. What’s also noteworthy is that Dunkin’s CEO, Nigel Travis, has developed the Russian market for another US brand in the past, Papa John’s.

Hold the horses! Stop the presses! Forget all about my previous comments about the GM-Opel-Magna-Sbersk deal because the deal is off. GM announced that it withdraws its prior agreement under which the  Austro-Canadian conglomerate Magna would have purchased Opel from it. Even insiders are still wild guessing about the true motivation for hitting the brakes. Some say that it’s a matter of GM having emerged from bankruptcy flush with cash and therefore don’t need to get rid of Opel any more. Others suspect a tactical move behind this. What somehow puzzles me is a recent photo showing Russian oligarch Oleg Deripaska with Magna International chairman Wolf and GM CEO Henderson in the United States. Deripaska whose automotive company GAZ would have hugely benefitted from the deal has been denied US visas for several years and now has been brought in by special arrangement of the FBI. Word is also that Magna is not really sad about the deal being cancelled fears of jeopardizing good relationships with other customers among the automotive brands kept mounting. What’s interesting is that the GM made the announcement as German chancellor Angela Merkel was about to board a plane back to Germany after an important state visit to the United States. According to German media, this didn’t go down well with the German government which now may be looking into withdrawing commitments for subsidies to Opel.

After months of uncertainty and intensive negotiations, GM has announced this week that it will decide a 55 percent stake in it’s European Opel unit to a consortium of the Austrian-Canadian automotive supply conglomerate Magna and its Russian investment partner, Sberbank. 35 % of the shares will remain with GM, and another 10 % will be held by Opel’s employees. Magna’s majority shareholder, Frank Stronach, is coming full circle with this – he started a garage business in Toronto in 1957 manufacturing sun visor brackets for GM and then turned his company into one of the largest players in the automotive world. Having already experienced some difficulties in the Russian and Canadian markets, it’ll be interesting to see how Magna will be able to integrate so many different cultures under its wing – an Austrian-Canadian mothership, a Russian investor, an American shareholder and all of that in a German setting, competing on world markets. First, however, the parties to the agreement have to sign on the dotted line which is not expected to happen before German elections.

Pervasive corruption and an impenetrable maze of bureaucracies have caused IKEA to freeze new investment projects in Russia. One example of IKEA’s immense frustration with Russia is it’s 130,000 square meter shopping complex in Samara. It’s opening was originally planned for late 2007, but was then delayed by authorities eight times. According to 83 year old IKEA founder Ingvar Kamprad, Russia’s ‘unpredictable characater of administrative procedures in Russia’ has cost IKEA a total of $190 million so far. It’ll be interesting to see if IKEA’s decision will have a ripple effect among other Western companies who are equally frustrated by Russia’s business environment.