The German-Russian foreign trade has been doubled since the year 2000 to 50
billion Euros. According to the Ost-Ausschuss of the German Economy (Deutsche
Wirtschaft) this positive trend will continue during the next years. German
companies are planning investments accounting to 1.4 billion Euros in the Russian
market and as well Russian firms are going to invest in Germany.
Russia is not only the biggest country in the world but also richest in commodities.
Furthermore, it is also one of the fastest growing economies in the world with a
geographical closeness to Germany. This should be reason enough for the
German companies to invest in the Russian market and reversely. Next to
exporting and licensing the entity form of joint ventures represents a good strategy
for entering the foreign market. The hosting partner will deliver the knowledge and
technology and the home partner will offer experience in the market, meaning
awareness of cultural differences, political regulations and potential conflicts.
Nevertheless, joint ventures are also starting points for conflicts that may
endanger the success of the business. This paper deals with the conflict
management of joint ventures that have been coordinated by German and
Russian firms.
At first the terms conflict management and joint venture will be defined followed by
an introduction to the two countries Germany and Russia. At the second stage
different starting points for conflicts will be determined. Examples of these are the
differences in culture, the restrictions and regulations for entering the Russian
market and opinions of experts on joint ventures with Russia. Due to the lacking of
direct information on conflict management of actual joint ventures, two successful
joint ventures will be presented. Occurred and potential conflicts will be
determined. With help of these conclusions will be drawn upon the management of
conflicts which most often leads to success in business. To complete the paper
lessons learnt for more Russian joint ventures will be pointed out.
Table of Contents
1 Problems and Objectives of the topic
2 Clarification of important terms being used
2.1 Conflict Management
2.2 Joint Ventures
2.3 The Russian Federation
2.4 Federal Republic of Germany
3 Analysis
3.1 Cultural comparison of both countries based on Hofstede
3.1.1 Individualism versus collectivism
3.1.2 High versus low power distance
3.1.3 High versus low uncertainty avoidance
3.1.4 Masculine versus feminine
3.2 Historical development of Russian job involvement
3.3 Transformation of Russian law principles
3.4 Internal stability conditions of JVs
3.5 Empirical study of JVs in Russia
4 Selected examples of German-Russian JVs
4.1 Nord Stream AG
4.1.1 Importance of Russian Gas for Europe
4.1.2 Organisation of Nord Stream AG
4.1.3 Motivation of both sides to enter the Nord Stream JV
4.1.4 Possible conflicts between the participants of the JV
4.1.4.1 Increased Russian leverage on non-connected countries
4.1.4.2 Increased Russian leverage on connected countries
4.1.4.3 Domestic Energy Concerns
4.1.4.4 Risk of Appeasement
4.1.4.5 Regional and Intra-EU Frictions
4.1.4.6 Dependence on scarce resources
4.2 Mobile TeleSystems OJSC
4.2.1 General information
4.2.2 Shareholder structure and historical development
4.2.3 Breaking up of the international JV and consequences
4.3. AFK Sistema as a special partner for Russian-German JVs
5 Lessons Learnt
Objectives and Core Topics
This academic paper examines the conflict management strategies within German-Russian Joint Ventures (JVs). It aims to identify the underlying causes of conflicts—rooted in differing historical, cultural, and political contexts—and evaluates how these partnerships can be managed to achieve business success despite these challenges.
- Analysis of cultural dimensions (Hofstede) between Germany and Russia.
- The historical influence on Russian work mentality and legal transformation.
- The impact of internal stability conditions on JV performance.
- Case studies of Nord Stream AG and Mobile TeleSystems (MTS).
- Strategies for mitigating risks in cross-border cooperation.
Extract from the Book
3.1 Cultural comparison of both countries based on Hofstede
International JVs, due to the cultural differences, encounter difficulties, which may cause conflict, misunderstanding, and poor performance. Besides creating problems in the operation of the IJV, these differences are also the sources of tensions and anxieties between partners. The problems and failures are primarily related to the deterioration of relationships and unresolved conflicts between partners, which arise from the unobtrusive influence of culture on personalities and consequently on management systems. The effects of culture on people are strong and influence their behaviour and perception consciously or unconsciously. (cf. Kavoosi 2005, p. 151ff.)
Generally, the Russian culture is delineated as a culture with high particularism where the timing is dictated by the circumstances. The Russian top-down management perspective is supported by the dual hierarchy, which links all management levels through pyramidal connections and forces from top to bottom. This approach symbolizes a high power distance, where the Communist Party Organs paralleled every management layer in order to achieve efficient control in order to reach political aims and objectives. This long-lasting control gives rise to the suspicion that many Russians still show great dependency towards their superiors and that they are quite sceptic towards their own abilities. Besides, it can be said that this management perspective does not allow employees to develop self-initiative and creativity.
Summary of Chapters
1 Problems and Objectives of the topic: Provides an overview of the increasing economic cooperation between Germany and Russia, highlighting both the growth potential and the prevalent stereotypes that complicate business relationships.
2 Clarification of important terms being used: Defines the concepts of "conflict management" and "joint venture," while introducing the historical, political, and economic status quo of both nations.
3 Analysis: Investigates the root causes of conflict potential, including cultural comparisons, Russian work mentality, and the evolution of legal principles governing foreign investment.
4 Selected examples of German-Russian JVs: Examines Nord Stream AG and Mobile TeleSystems OJSC as representative case studies, detailing their origins, internal structures, and the conflicts they faced.
5 Lessons Learnt: Summarizes the key insights for successfully managing cross-cultural JVs, emphasizing the necessity of cultural awareness and the rigorous analysis of potential partners.
Key Words
Conflict Management, Joint Ventures, Germany, Russia, Cross-Cultural Management, Hofstede, Nord Stream, Mobile TeleSystems, Foreign Direct Investment, Perestroika, Corporate Culture, Russian Law, Energy Security, Business Risks, Teamwork.
Frequently Asked Questions
What is the primary focus of this research?
This paper investigates the complexities of managing conflicts in Joint Ventures between German and Russian companies, considering the unique socio-political and cultural environment of both nations.
What are the central thematic fields addressed in the text?
The core themes include cultural differences, the historical context of Russian labor, the legal framework for foreign investments in Russia, and the strategic management of international partnerships.
What is the primary objective of this work?
The objective is to provide a deeper understanding of why conflicts arise in these JVs and how they can be managed constructively to prevent project failure.
Which scientific methods were employed?
The authors utilized a combination of literature analysis, Hofstede’s cultural dimensions, empirical data regarding business risks, and a qualitative analysis of two prominent case studies (Nord Stream and MTS).
What does the main part of the paper cover?
The main body covers the theoretical definition of key terms, a comparative cultural analysis, the historical development of Russian job involvement, an overview of the Russian legal environment, and detailed examinations of selected German-Russian joint ventures.
Which keywords characterize the work?
The work is characterized by terms such as Conflict Management, Joint Ventures, Cross-Cultural Management, Energy Security, and the specific economic history of Russia post-Perestroika.
Why is Nord Stream AG significant for this study?
Nord Stream AG serves as a primary example of how large-scale energy projects are used strategically, highlighting conflicts regarding regional influence and energy dependence on Russia.
What were the main reasons for the breakup of the MTS Joint Venture?
The breakup was driven by a lack of shared vision regarding management control, with the Russian partner (AFK Sistema) consistently seeking majority ownership, eventually leading the German partner to divest.
How does the Russian concept of "work" differ from the Western one?
Historically, Russian work involvement has been heavily influenced by a legacy of top-down command structures and survival strategies under harsh conditions, leading to different expectations regarding responsibility and initiative compared to Western protestant-based work ethics.
- Quote paper
- A. Rademacher (Author), K. Zimmer (Author), J. Laubner (Author), A. Payarolla (Author), 2008, Conflict Management in German-Russian Joint Ventures, Munich, GRIN Verlag, https://www.grin.com/document/160361
