European FDI for Emerging Market: The German Firm Strategy in Russia

This case focuses on the challenge of the Knauf Group strategy development for the Russian market. Knauf's active investment policy led to the growth of its brand recognition in the construction materials market and allowed for the creation of a strong premium brand. As a result, the company acquired a highly competitive position in the Russian market.Management had plans to increase investment in Russia, especially in the North-West region of the Russian Federation. However, in the year 2005 the company got rid of one of its most successful businesses, the Pobeda Knauf Masonry Mill in Kolpino just outside of St. Petersburg. The decision to focus on the production of gypsum products and related materials was made.Up to the moment of the sale of the Masonry Mill to a major Russian construction company LSR, the management of the factory had been conducted according to the same principles as were in force in Knauf's other businesses. The management focused on a strategy of quality, active marketing and improvement of the enterprise's organizational structure.After twelve years of success in the Russian construction materials market, Knauf sold its successfullyfunctioning manufacturing facility to its direct competitor, the Lenstroyrekonstruktsiya Group. This might either be evidence of the fact that Knauf is aspiring to more narrowly define its core competency via staying away from non-core activities, or perhaps, is an indication of the loss of its control over its affiliates and the decrease of its competitive positions in the North-West market of the Russian Federation.