Studies Eastern European Markets
Eastern European Markets
Kari Liuhto
- The case of the Latvian Shipping Company
Lappeenranta University of Technology.. Department of Industrial Engineering and Managemen. Research report N:o 124, 2001


UNCTAD has listed The Latvian Shipping Company as the most transnational post-socialist corporation in terms of assets abroad. Even if this Latvian corporation has shifted 98 % of its assets abroad, worth USD 493 million, the company´s internationalization can be characteristed as a technical cost-minimizing exercise rather than a strategic investment decision, since it is extremenly easy to re-register ships under foreign flags.
Despite the fact that flagging ships out of Latvia is a rational measure to reduce costs, and hence, to improve the firm´s competitiveness, The Latvian Shipping Company´s operations abroad remind one more of a cost reduction and taxation planning meneuver than a true internationalization, because the internationalization decision does not have to take into account two essential issues: (1) the strategic significance of a decision (a cost and risk aspect); and (2) tenure of operations (a commitment aspect).
Also, their environment selection can be characterized as technical effiency seeking between ´liberal flags´rather than strategic decision making. Consequently, the postponed privatization overemphasizes the maintenance of control in modal choise, as building strategic alliances would be extremely difficult during the on-going privatization.
As shipping is rather peculiar field of business in terms of internationalization, it can be suggested that UNCTAD´s ranking would exclude not only financial corporations, but also transportation companies, and enterprises from countries which have disintegrated in the transformation process, such as the ex-Soviet republics and former Yugoslavia and ex-Czehoslovakia since their investments in formerly united territories gives somewhat biased information on the internationalization of the post-communist firms. Moreover, adding the main destinations of outward investments in the report would contribute to the understanding on this very topical phenomenon.
Should companies from countries, which have disintegrated during the 1990s, be excluded from UNCTAD´s ranking, it would leave only a handful of companies which are truly transnational. If the enterprises of newly independent states were erased from the list of the top 25 transnational corporations, the list would look completely different.
To conclude, the expansion of Eastern companies in the West offers a new perspective in integrating transition economies into the world economy. Such a dual integration view aids the post-socialist companies´goal in becoming full members of global business community, and hence, contributes to the peaceful integration of formerly socialist countries into the world economy.

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