Production locations for the internationalising food industry: case study from Russia

Abstract

Purpose

The purpose of the paper is to identify the location decision criteria and their relative weights in the context of food manufacturing internationalisation into emerging markets, and to clarify how supply chain related factors are reflected in the location decision criteria. Knowledge of these factors is considered crucial in understanding the entry and location decisions of foreign food manufacturers into emerging markets where a high level of operational uncertainty may be evident.

Design/methodology/approach

The AHP method is utilised in the creation of a location/investment target ‐model, with input from a panel of decision makers in the Finnish food industry. A real‐life application from the Russian agribusiness industry is presented.

Findings

Seven criteria reach above average values, namely economic activity potential (10 per cent), consumption potential (9 per cent), available acquisition targets (12 per cent), adequate supply of raw materials (13 per cent), competitive situation (16 per cent), favourable level of input costs (11 per cent), and SCM readiness and know‐how (9 per cent). The significant weight of the last item and the supply chain related factors in general underscore the total demand‐supply network‐oriented thinking in the food industry.

Research limitations/implications

Supply chain considerations are a major factor in the food industry location decisions, due to the need to utilise the local sourcing, distribution and service systems in the economy. The downstream, upstream and related service sectors in the supply chain can thereby serve as constraints for the business expansion process.

Originality/value

The research addresses the sparsely researched area of linking a firm's internationalisation decision making with supply chain management issues in the emerging market context.

Citation

Lorentz, H. (2008), "Production locations for the internationalising food industry: case study from Russia", British Food Journal, Vol. 110 No. 3, pp. 310-334. https://doi.org/10.1108/00070700810858718