Studies Eastern European Markets
Eastern European Markets
Kari Liuhto
- A Hungarian oil and gas company´s operations abroad
Lappeenranta University of Technology
Department of Industrial Engineering and Management
Research report N:o 124, 2001


    The Hungarian Oil and Gas Company, MOL, was chosen for this case study since it is one of the most international post-communist corporations in Central Eastern Europe. According to the UNCTAD survey, MOL was in 1998 the10th most internetional post-socialist company. In fact, this Hungarian group would be the most transnational in the UNCTAD raking, if the companies from those countries, which have disintegrated during the transformation process were dropped from the list. The exclusion of the companies from the disintegrated countries might be approriate since their expansion to formerly united regions does not necessarily meet all the requirements of the internationalization.

    This case study shows that a number of reasons justify MOL`s internationalization. First, due to modest natural gas and oil reserves in Hungary, it is logical that MOL aims at securing their supply via acquiring stakes in foreign fields and through production sharing agreements. Besides securing the raw material supply, survival in the contemporary oil and gas business forces MOL to increase its size, which consequently, means that it must expand its operations abroad. Also opportunities involved in the privatization of MOL`s counterparts in other transition economies and approaching EU enlargement have attracted this Hungarian company to venture outside its home nest.

    MOL focuses on post-socialist markets, where the firm perceives itself to have a competitive advantage. While MOL concentrates on the former socialist markets, the company divests in the Arab countries, where its experiences are less-encouraging.

    MOL has selected cooperation as a modal choise in securing their raw material supply. This is logical practice since MOL´s financial resources are rather modest. In order to guarantee a sufficient refining capacity, the company might decide to collaborate with a foreign company or even acquire a controlling stake in a foreign unit. In downstream activities, MOL has mainly expanded its own retail chain but it has also used licensing to spread its retail operations abroad. A joint venture option with either a Western or an Eastern counterpart may be used as the modal choise, if MOL decides to enter Western markets.

    In closing, it can be argued that MOL exemplifies a new phenomenon i.e. the expansion of Eastern enterprises outside their home market. The growth of Eastern investments in EU members and other Western countries would signify a deeper intergration of transition societies into the world economy since genuine integration is, without question, a two-way street. This two-way road would also benefit the transition economies, which are not the EU candidate countries. The non-applicant countries would benefit from increasing trade between the enlarged Union and its neigboring regions. The non-candidate countries also enjoy the advantages of the European Single Market via their companies´investments in the forthcoming EU members.

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