Joint ventures are beneficial not only the company but also for the foreign corporations. While SAIC has acquired worldwide fame reputation and high technological upgrading, MNCs use manufacturing capability and established supply chain through a local company. The factor of firm's structure and rivalry was crucial in this case: when creating a JV with two global leaders in the automotive industry, SAIC wins in technology transfer and streamlining marketing strategies. Both MNCs compete for the right of the leading company in making SAIC internationally competitive corporation. However, it is likely that when the actual release of the brand, SAIC will have to compete with their partners.

The company's success is undoubtedly due to the major contribution from the government. However, state control within the company was limited in order to improve efficiency. Government can harm the competition due to overregulation.

Limited participation of foreign capital and the government protection policy did not allow for healthy competition between suppliers to develop, thus there was no stimulus to growth and innovation. The state did not distinguish profit from local suppliers and assembly plants, their main fact was that SAIC, in principle, makes a profit. So they forced the company to purchase parts from local suppliers, who could asked any level of price because of the very high demand. This policy has led to not the sub-optimal strategy of production and product quality.

Government intervention can suppress the competition between companies.
SAIC will heavily depend on state and will not be able to achieve the level of an international company, which had been planned initially. MNEs helped to increase market efficiency introducing them to a global system of benchmarking.

In conclusion, the success of SAIC is the result of efficient use of foreign experience and technologies and the ability of rapid integration in China. Under control of the government, MNEs have made a significant contribution to the development of automobile industry of China. At the moment, the company's main goal is to sustain growth and development of the own automotive business to the international level. China, as an emerging market with limited experience in industrialization, had to go the hard way to approach the technology and development the world's leading auto companies. The government was committed to open market access in return for the transfer of skills and knowledge technology.

Government policy continues to promote competitive advantage for SAIC. In addition to the provision of factors of production, the state conducted purposeful policy of import substitution and development of domestic innovative capacity. «The government used foreign exchange controls, high import tariffs, ownership restrictions, local content mandates and requirements of the R&D to achieve these goals. After joining the WTO, the majority of protective measures must be removed, including mandates local content and foreign exchange controls, and import tariffs were significantly reduced.» [21]

CHAPTER 3. Application of the Chinese experience on the Russian automotive industry

Part 3.1 Russian automotive industry overview

In 2015 the world automotive market has sold over 89mln new cars, while in Russia, sales were around 1,6mln. Thus, Russian automotive market share is 1,8% from the world auto production. Autostat, Analytic Agency. Retrieved on April 15, 2016 from https://www.autostat.ru/infographics/25033/ The largest share of Russia in global sales belongs to Renault, which is not surprising at all, because the largest auto manufacturer in Russia- AVTOVAZ - owns a joint venture with RENAULT-NISSAN concern.

Graph 3. Vehicle Sales in Russia, 2005-2015. Source: Statista, 2015

Overall, we can see that over the last 10 years there were two periods of sudden decline in car sales in Russia. First one was in 2009, the period of the Global Financial Crisis. It must be noted that the Russian automotive industry, as well as the whole country, has suffered from the global financial crisis much stronger than developed countries.

Measures to eliminate the consequences of the crisis have been taken quite late. As a result, in 2009 the Russian automobile industry has slowed down their development, as many domestic producers were not able to adapt to lower demand. Thus, the passenger car market for 2009 saw annual sales decline by almost 50% and the volume of sales on the market of new cars amounted to only 1.5 million units.

After the crisis, there have been significant changes in the structure of production and consumption in the global market in 2010 changed the structure of Russian car market, and identified new long-term tendencies of its development.

In 2015, Russian automotive market has dropped dramatically to 0.95mln units (43% decrease in sales volume) in contrast to other emerging auto markets.(For example, China had in constant 2.5% increase in unit sales as well as India) PWC report (2015): The Russian automotive market: 9m 2015 results, https://www.pwc.ru/en/automotive/publications/automotive-presentation-2015-en.pdf. In Russian ruble terms, the market decreased by 34%, while in dollar terms it decreased by 61% due to the change in the average exchange rate.

There are several reasons for such disappointing results. Firstly, the macroeconomic situation in Russia was very unstable during the last couple years. It is proved by current GDP growth rates decreasing from 0.4% in 2014 to -4% in 2015 which was partially caused by the exchange rate (RUB/USD) jump in the last quarter of 2014, when the price of dollar was about 60 RUB, which is unprecedentedly high. Secondly, from the 2015, the Russian government implements programs aimed at stimulating demand, so that the decline in the market slowed down in the 3rd quarter of 2015.

The future of the Russian automobile market will depend on macroeconomic situation, government support, and the strategies implemented by key market players.

The most recognizable auto producers in Russia are Avtovaz, Gaz, Kamaz, Zil, from which Avtovaz is the largest auto manufacturer, in sales and volumes according to figures for the last 5 years. http://company.avtovaz.ru/press/376

Table 1. Top-10 automotive producers, 2016(Source: Autostat https://www.autostat.ru/infographics/25210/, Retrieved on April 11, 2016)

The automotive cluster includes the following companies and organizations (Goryunov I. Cluster approach: strategic planning is vital for the development of enterprises 2005,)

1) Assembling production of cars

2) Production of auto components and materials

3) Research and technological organizations

4) Financial organizations that provide credit policy, insurance, and so forth

For effective implementation of cluster projects, it is necessary to consider its features. Each country and region characterized by its own peculiarities, which are of importance for the competitiveness, so the development of cluster areas should take into account local and global development trends, but despite this the experience of other countries is very important in the development of implementation mechanisms and cooperation within industrial cluster.

Russian car industry is structurally different from other countries. The Russian market is mostly saturated by imports and very little exports. Also, there are considerably small amounts of investments in technology development. Russian clusters have fairly weak relationship between the elements. In additions, there are no localization of component manufacturers.

Cluster in Shanghai can be distinguished by strong cooperation between producers and suppliers in all directions.

In many developing countries, the automotive industry has long been powered by its own suppliers, the case with SAIC proved that with government support this was possible. However, in Russia, even the largest carmaker AVTOVAZ uses up to 30% of imported parts.

The problems of clusters in Russia are the following:

1) Most suppliers do not meet international standards; the costs are higher than abroad

2) Lack of basic technologies

3) Low level of cooperation: none of the Russian manufacturers have a database for research & development (R&D)

4) Lack of infrastructure

5) Only partial presence of supporting industries

6) Low labor mobility

As for the automotive cluster in Samara, we see the following SWOT table:

Source: http://strategy.ru/UserFiles/File/Goverment/avto%20Samara.pdf

To overcome the problems and to stimulate efficient production in the cluster the following measures should be taken:

1) to review the cluster development

2) to stimulate the development of innovations and scientific-technical base

3) to develop relations with suppliers

4) to develop transport infrastructure

5) focus on natural and economic peculiarities of the region

Russian automakers are suffering from a lack of modern technologies, investment resources, physical and moral deterioration of the technological base.
Despite the fact that some of the new Russian assembly enterprises have access to modern technology, they do not have sufficient resources, so far very limited opportunities of their own engineering and production.
As for foreign manufacturers, a low level of localization, scale production, and significant lack of state support -- in the form of a reliable network of suppliers of automotive components, characterizes them.

Russian component manufacturers lack the technology and due to the significant age of the Russian fleet are mainly involved in the production of components for older vehicles. There is a lack of investment resources, as well as morally and physically outdated technical base. The production is aimed at domestic consumption, because a low level of product quality does not allow it to meet international standards. Joint venture in Russia exists, and due to the presence of foreign partners have their own technology and equipment. However, due to the cautiousness of the aliens and the specifics of Russia's own engineering and R & d are practically absent. The production itself is characterized by an extremely narrow specialization: are produced mainly simple components with low added value.

The Russian automotive industry can be seen in different spheres. If we are talking production of cars, then the main problems are the low productivity and limited capacity of implementation. The same problems are present in the manufacture of auto components. In General, the Russian market imports around 80% of the components, while the volume of exports is dramatically small. Low demand for car components makes it difficult to stimulate to the creation of competitive industries. Moreover, there is no Russian base R&D, there is no demand for domestic developments, despite that that in Russia a fairly large number of engineers with higher education. Also, the volume of investments in Russian companies is falling. ( Источник: «Стратегия развития автомобильной промышленности на период до 2020 г.», стр.82, табл.5)

Overall, we can identify the main factors which can affect the competitiveness of a cluster, Firstly, the scale of production - today, the scale has been mostly achieved at the expense of flexibility. Secondly, only about 5% of Russian suppliers meet international standards. Most of them are small and their costs are 10-15% higher than abroad. So, one way of improving it could be the increased localization of production. Moreover, the cluster can offer beneficial conditions for suppliers, such as co-financing and further access to the global market. There is also lack of basic technology in Russian cluster, which can only be changed by large-scale investments in innovations and material processing.

As for the R&D, cluster does not have its own database of research and development and there is low level of collaboration and cooperation as well as the lack of independent research and engineering centers. There are several ways to stimulate the R&D development. First of all, state support for priority research and development, which could enhance creation and coordination of consortiums for implementation of R&D projects. Additionally, there is a need for integration of Russian engineering centers in international research projects.

The infrastructure looses not only in lack of road and railway, but also because of lack of storage capacities in the region. So, the whole infrastructure should be reconsidered by developing logistics infrastructure, including transport and storage.

There is only partial presence of supportive (related) knowledge-intensive industries (aircrafts, chemistry, etc.) and insufficient inter-sector cooperation which also hampers the development of an effective cluster. The measures should be taken for the systematic attraction of knowledge-based industries.

The problem of underdevelopment and inadequacy of social infrastructure in different regions is a barrier to mobility of qualified personnel. Thus, measures to support transfers, payment of certain types of expenses and the development of regional social infrastructure are necessary.

These are the general ways for enhancing efficiency within a cluster. The effective development and operating productivity of the cluster must be provided not only with the efforts of the government, but with the reversal of the company itself. Within the cluster, automakers can offer favorable conditions for the parts manufacturers for cooperation and access to international market. Such measures include - co-financing, because the investments to automotive companies in Russia are rapidly falling every year. Over the five years, from 2010 to 2015, the overall investments in the leading Russian companies, including Avtovaz, Sollers and Kamaz decreased by almost 12%. http://www.mirec.ru/2010-02/rus-autoprom Also, one the benefits of such cooperation can be participation in technological development with foreign partners. In the case of Sollers, the company can provide the suppliers with an agreement of technological research with one of the world's leading companies - Ford , which will ensure the competitiveness of domestic producers and will strengthen the international position of the companies. The company may require the suppliers to reduce costs in exchange for long-term relationships with stable orders, subsequent orders from abroad. Also relevant simplification of the procurement activities that will reduce storage costs. For Sollers, the closure of one of the plants is rather possible because all of the 4 plants are situate in the most progressive industrial region in Russia. So effective cooperation within a the cluster will definitely prompt the competitiveness of the company.

The financial structure of the partnership should not be neglected as well: the capability solution is the reduction of the share of ownership in the company suppliers at the expense of localization of production

Moreover, it is necessary to revise the management culture of a joint venture to create a competitively strong producer. Firstly, it is important to provide effective cooperation between the partners. Also, management should take into account the difficulties in interaction between employees from different countries. That means, that more time and money should be spent on developing courses and trainings for the employees within a cluster. In order to guarantee the honesty from the employees, the managers should create some kind of bonuses to motivate work.

As for the staff, managers should pay more attention to corporate culture due to different cultural values inside the cluster. English should be the only official language and studying of it should be obligatory for the whole personnel.

Conclusion

In the XXIst century the automotive industry has been becoming more with active expansion and export policy. In addition, there is a constructive rapprochement and unification of manufactured products, as well as the appearance of regional types of products, adapted to road traffic, climatic, national and special cultural values of the country, leading to sustainable growth of demand for the automotive products in different countries. Majority of the industry players has chosen path of integration into the global automotive industry by attracting foreign direct investment leading automotive multinational corporations. This is confirmed by the development strategies of the automotive industry in emerging markets of the BRICS countries. This way allowed developing countries to maintain the competitiveness of the domestic automotive industry.

In modern conditions the automotive industry China has signs of integration in the system of the world production of vehicles. The position of this country in world production of cars in 2005-2015 increased from eleventh to first place, so China becomes one of the largest automobile producers in the world.

The effectiveness of the development of the automotive industry in China lies in the specific combination of prerequisites. First of all, the massive domestic and foreign investment, expansive production and export of cheap products of relatively high quality. Secondly, the country sustained the reproduction of necessary technologies from the leading automotive MNCs and used cheap factors of production. Government implemented the purposeful state policy of export-oriented production. The strategy of China is in line with the strategies of reforming the automotive industry in such world leading manufacturers as South Korea and Japan.

An analysis of state regulation of automobile industry of China has shown that among the most effective measures undertaken by the government in order to improve the competitiveness of the industry was the maintenance of a high level of localization of all the stage of production. Moreover, the compliance with certain requirements for the transfer of technologies to foreign partners and subsidies for provincial residents to buy cars, as well as measures for disposal of old cars have caused a significant improvement. Government had the desire for the formation of oligopolistic structure of production by encouraging consolidation around the largest national manufacturers; create barriers to the import of new vehicles and a ban on the import of used cars. Also, it provided tax incentives for enterprises that carry out R&D in the automotive industry, highlighted priority areas for foreign investment in the production of automotive components in the territory of the country and encouraged the development of Chinese own brands.

As many more emerging markets, the Russian car market in recent years, developing under the influence of unsaturation, a low level of car ownership and depreciation of the car fleet. The analysis showed that the structure of the internal market continues to decrease the share of imported cars and Russian brands, but an increasing share of foreign cars produced in the domestic market. We believe that the parameters of the development of the automotive industry, announced by the government for 2020 not feasible due to deterioration of the production and technological bases, lack of modern technology, lack of development of their own engineering and of insufficient scale of production to increase the level of localization of production. Urgent action is needed, to improve the investment environment in the automotive industry: reducing administrative barriers; development dorozhno transport infrastructure, simplification of taxation and customs duties; part of the state in the joint financing of investment projects. At the same time for further liberalization of the market of cars of Russia is necessary: the reduction of import duties on imported cars; the failure of large-scale investments in the automotive industry; selling the state's share in the automotive industry to individuals.

However, after researching the example of the Russian automotive company Sollers, the production of which is part of the Samara cluster, we came to the conclusion that only public policy can lead the company to the path of development of international competitiveness. strategic management of the company and its efforts to create favorable conditions for effective operation of the cluster is not less important. The measures provided can be classified into 2 groups: first - the effort of the company to attract suppliers into the cluster and provide sustanable partnership; second is the management within the company, including the perdonel profesional development, impoving the structure of payment of wages, the centralization and globalization of procurement and localization of every step of production and sales chain.

The further research in the sphere of enhancing competitiveness of automotive companies in emerging countries could be dedicated to the more deep strategies of the localization process within a cluster, which could not only help to the success of the given company, but also to reconsider the appearance of born global export-oriented production in emerging markets.

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