Acron Group

Acron Group

Table of Contents

Introduction. 3

The Company Background History of Internationalization. 4

Eclectic Paradigm and Acron Internationalization Patterns. 5

Critic of Acron’s Internationalization Strategies. 7

Export Managing Companies. 7

Joint Ventures. 8

Acquisition. 9

Future Ideas/ Recommendations. 9

Conclusion. 12

References. 14





            Internationalization is not a new phenomenon; since antiquity, ancient trade routes were established for merchants to transport their products abroad and benefit from new marketplaces and a diverse customer base (Liberman, 2013).  However, the extent of internationalization seen today far exceeds anything witnessed in any other time in recorded history.  Modern companies, especially larger ones which provide supplies and services used throughout the world, recognize that to compete in the highly competitive international marketplace and thrive in a globalized world, they must be able to internationalize their companies in an effective manner while cutting down on unnecessary expenditures when possible (Amante García and Martínez Martínez, 2014).  The goal is to maximize exposure while minimizing costs, overhead, and legalities.  This is where solid strategies come into play (Liberman, 2013).

One company which has done a great job of internationalizing and meeting the ever changing demands of the international marketplace is the Russian based company Acron Group.  Acron Group is well recognized throughout the international community as a global producer of mineral fertilizers (, 2017).  Its clearly defined development strategy and incredibly well detailed and articulated business model helps to ensure that the company continues to thrive, grow, and turn a lucrative profit in the foreseeable future. The company is extremely forward thinking and claims that “over the next few years our investment programme will make Acron one of the most competitive producers of complex fertilisers globally.” (, 2017)

This report aims to detail the company’s general history as well as its basic history of internationalization.  It will carefully detail some of the many strategies Acron relies on to internationalize its products and, subsequently, critique the effectiveness of its chosen strategies. The next section will offer recommendations to be considered in the future to ensure that the company continues to remain highly competitive.  Finally, a conclusion will be offered highlighting the likely future outlook of the company.

The Company Background History of Internationalization

            Acron Group is a very prestigious leading Russian “vertically integrated NPK producer” (, 2017). It is ranked among the top ten global producers by its NPK capacity. It is comprised of two major production facilities.  The first is Acron, which was first established in 1961.  The second is Dorogobuzh, which traces its roots back to 1966. (, 2017)  These two companies formed the basis of the entire Russian fertilizer industry.  Following the collapse of the Soviet Bloc, these two entities were privatized and no longer owned by the state.  To deal with the major changes involved in the privatization process, the companies underwent a substantial revamping and upgrade program.  Moreover, they consolidated their corporate governance system. Today, Acron Group has its very own distribution and logistics networks.  It also invests directly in raw materials, which eliminates the need for a middle man. Acron Group has had to make many key changes in order to increase its marketability over the years and has done a very good job of remaining highly competitive with China, the largest fertilizer market. (, 2017)

In 2005, the company acquired 50.5% shares of the highly profitable fertilizer producer Hongri Acron. With this acquisition, Acron Group was able to set up its own distribution network, again cutting out the need for a middle man and augmenting its total revenue (, 2017). However, in 2016, Acron sold the shares citing a need to remain within its long term goals. Then, six years later in 2011, the company entered into a very lucrative international joint venture (IJV) with Saskatchewan, Canada based company Rio Tinto.  The IJV was coined the Albany Potash Prospect; its headquarters are in Canada, thereby ensuring that the company had strategic alliances with fertilizing industries and raw material mines in Russia, China, and Canada. (, 2017).

Internationalization Strategies used by Acron

Country Internationalization strategy
People Republic of China Indirect Export: Export Managing Company (Yong Sheng Feng)
Estonia Acquisition of AS DBT
United States of America Indirect Export: Export Managing Company
Switzerland Indirect Export: Export Managing Company
Poland Shareholding (Grupa Azoty)
Canada Joint Venture (Rio Tinto)


Eclectic Paradigm and Acron Internationalization Patterns

The model of internationalisation used by Acron can best be explained by the eclectic paradigm. This theory sets out to explain the pattern of international production which is founded on the notion of the advantages that the company’s owners accrue from the foreign investment. Further, it shows that for the parent company, it is likely to weigh the attractions of the foreign market for production and finally make decisions rationally based on analysis of transactional costs (Whitelock, 2002). In particular, the use of transactional costs is important in explaining the vertical integration decisions of firms and how they decide to enter into a given market.

Using the eclectic paradigm, a transactional cost analysis assumes that there are numerous suppliers in the market hence making it competitive. Transactional cost analysis predict that when a given product is of high specificity, a firm is likely to maintain control of the distribution channels in order to control its specific advantages in the market (Whitelock, 2002). On the other hand, the firm is likely to have numerous suppliers to encourage efficiency. In the case of Acron, using this paradigm, the company has been highly critical of the cost of operation in foreign companies. In 2016, Acron group sold its stake in the Chinese producer Hongri Acron (Acron, 2016). Initially, the company had acquired these shares considering the large market in China. In its 2009 annual report, when describing the business environment in China, Acron stated that one of the main problems was the legal system within China. The company stated that the legal system in China though depending on written statutes was not fully developed. It lamented the fact that previous decisions make in similar cases were not binding and new and totally different decisions could be entered against a company in future cases (Acron, 2009). Owing to this, the company felt that the protection given by the law was not adequate for it to continue operating in China. In its 2016 decision to sell stakes it held in the Chinese company, Acron considered the uncertainties as would be predicted in the eclectic paradigm.

Using the eclectic paradigm, it would be expected that a company only invests in a foreign country when it has certain advantages that limit its costs and increase its returns. So far, while Acron has used export managing companies to invest in Switzerland, China, and USA, it acquired the Estonian company AS DBT and also acquired shares in Poland’s Grupa Azoty. Both Estonia and Poland being part of the former USSR, their traditions do not differ much with those of Russia. According to Hofstede (2011), the ease of a company doing business in a foreign country is greatly dependent on the closeness between the cultures of the parent company’s country and the host country (Hofstede, 2011). As a result of this, Acron can easily make the few changes in its management styles to meet the standards required by Estonia and Poland. Unfortunately, Acron does not hold similar advantages in USA and Switzerland hence choosing a less hands on approach which would not require it to directly do business in the countries.

Critic of Acron’s Internationalization Strategies

Companies in the modern marketplace not only have to internationalize, they also must take advantage of the best and most appropriate internationalization strategies in order to remain competitive (Amante García and Martínez Martínez, 2014). In the case of Acron Group, a wide array of strategies are employed including international joint ventures, mergers and acquisitions, and Export Managing Companies (Fry et al., 2014).

Export Managing Companies

            When a company chooses to internationalize through indirect export, it means that the company is not active in the foreign market. Instead, it gives activities such as transport, handling of payments, and product delivery to an export management company that is situated in the home country. As a result of this, all the risks are passed to the intermediary. For Acron, this is the approach that it chose for China, the USA, and Switzerland (Durmaz & Tasdemir, 2014). The choice of Acron to use export managing companies in the three countries can best be explained through the business environments. For the USA, the country’s population and economic might provides an important market outlet for Acron’s products. Unfortunately, USA and Russia’s relations have always shifted based on the administration in power hence creating a hostile political environment for Acron (IBP.Inc, 2015). As shown for China, the decision to sell its shares in Hongri Acron and use Yong Sheng Feng for distribution of its products was informed by lack of a stable legal environment. For Switzerland, the reason for Russia’s establishment of an Export Management Company is to take advantage of the good political relationship between the countries (Lyubinsky, 2014). While Russia does not enjoy such cordial treatment with some of the European countries, the good relations with Switzerland means that it can use Swiss companies to distribute fertilizer to the rest of the European countries. This has been achieved through the Switzerland based companies Agronova Europe AG and Agronova International Inc.

Joint Ventures

            Acron has also benefited from forming several IJV. Its IJV with Rio Tinto, which formed the Albany Potash Prospect, provided the company with yet another means of obtaining raw materials needed to make its products.  Ultimately, this helped to cut out the middle man and protected the company from being beholden and vulnerable to suppliers of raw materials. The creation of a joint venture between Acron and Canada’s Rio Tinto is in line with the company’s eclectic paradigm concept. The concept predicts that when an asset is of high specificity, a company is likely to maintain control in order to ensure that the specific advantages are retained in the market (Whitelock, 2002). Since Acron had operated a subsidiary in Canada for some time, the discovery of potash would mean pushing down the company’s fertilizer production costs. As a result, to ensure that these benefits were kept, Acron thus reach a joint venture agreement with Rio Tinto Group which is a company whose origin is in Canada (Acron, 2014). While Acron provides the financial muscle in the venture, Rio Tinto has an advantage of knowledge of the Canadian market and laws hence reducing the would be transaction costs for Acron in that area.


Recently, Acron has used the concept of acquisition with a lot of caution. When the company first acquired 50.5% shares in Hongri Acron, it had envisioned market benefits such as a high population and a growth of the Chinese economy at a higher rate than other world economies. The failure in the Chinese approach and the likely success in its current acquisition of Estonia’s AS DBT and Poland’s Grupa Azoty can be explained by Hofstede’s cultural dimensions. According to Hofstede, when countries are far apart in several cultural aspects, there is a likelihood of failure of a business venture that a company wishes to run in such a country. Based on Hofstede’s research, there is a big difference between China and Russia in terms of individualistic concept, masculinity, and uncertainty (Hofstede, 2011). This is further compounded by the language barrier between the countries. While Estonia and Poland also have differences with Russia in terms of several Hofstede dimensions, they share several similarities in their cultures. As a result of this, Russia’s Chinese venture’s failure was owing to lack of critical consideration of culture.

Future Ideas/ Recommendations

            The previous sections testify to the company’s appropriate use of effective and well thought out internationalization strategies and its ability to market its products to the greater global community. Complacency is an issue that all businesses, especially large and successful ones, must fight against (Buckley, 2009).  It is too easy for companies which are experiencing success and extreme profitability to become careless in their business models and initiatives; therefore, it is germane for companies to continue to work hard to continue to retain their competitive advantage and adapt to market changes (Rolnicki, 1998).

The first recommendation for improving the business’s internationalization strategy would be to form more and better joint ventures with American businesses (Netzer, 2009).  The recent political environment in the U.S. is uncertain with the 2016 election of the new President; and many investors are leery because a lot is unknown.  One recent study reported “While we’ve seen wildly positive sentiment in many of the investor and consumer surveys released recently, it appears that Wall Street strategists don’t have high expectations for the stock market in the year ahead, many due to Trump’s foreign trade policies” (NBC, 2017).  While President Elect Trump seems to be on amicable terms with Russia, he and his administration has spoken out concerning the push towards eliminating free trade contracts and levying taxes on foreign exports.  This might mean that Acron Groups’ will be taxed heavily; this will make it extraordinarily hard for the company to compete with American companies (Young, 2009).

Based on the eclectic theory, for every transaction that Acon wishes to make, it must consider the costs and benefits of such ventures. Currently, while the use of an export managing company has been rewarding, if America changes its export and import policies, Acron’s products will be adversely affected in the USA. As a result of this, the company will suffer from having its products being priced much higher than those of other companies. Since there is a likelihood of having better relationships with the USA government, then having a joint venture where it produces its goods inside the USA will provide better returns than using the current strategy of indirect export. For example, it may be wise for Acron Group to try to form a partnership with an American fertilizer company.  This would work to the company’s advantage on several levels.  First, a competitor would no longer be a threat; rather, the two entities would work together for a mutual goal.  Second, Acron Group could protect itself from future trade policies which could threaten its marketability and competitiveness in the American marketplace (Tueth, 2010).

A second internationalization strategy the company should consider is the use of direct marketing. Acron is one of the largest companies by revenue. As a result, the company is financially able to carry out its own distributions. Currently, Acron Group boasts a competitive advantage in part because of its extensive distribution networks, particularly throughout Russia and China (where its main competitor companies are located). The company’s distribution chain does not stop there; instead, it had well-established distribution networks in Europe and the USA.  It notes that these relationships “provide the Group with market diversification and 100% product sales” (, 2017).  Further, the company is able to hold on to leading marketing positions in Brazil and Thailand due largely to its effective distribution chains (, 2017). In sum, the company has done an excellent job of appropriately using distribution chains to internationalize its products.  It has made many sound decisions to include partnering with well-established intermediaries and distributing its products throughout China, its largest competitor.

The World Trade Organization has been working to ensure reduction in tariffs and reducing discrimination of trading countries (Porter, 2015). Therefore, in areas where countries could have treated Russia negatively, the country will not have such a problem. As a result of this, several business environment factors as would be laid out in a PESTLE analysis will improve. In particular, the political environment will be more welcoming to the Russian companies such as Acron. In fact, another advantage gained from such an approach would be the ability of Acron to learn the market in details so as to consider other more aggressive strategies of entry. Since the main hindrance to using direct trade in some of the countries such as the USA and other European countries has been the stringent laws applied against it, then the assistance received from the World Trade Organization will ensure an easier way of maneuvering through the political systems in the respective countries.

Further, to form more direct relationships with high end customers so as to avoid losing money with middle men.  Already, the Group does a great job of selling its products directly to its buyers.  The company should consider furthering this initiative and doing more research to identify other larger purchasers who, currently, are buying the company’s products from a middle man.  On scholar notes that “You don’t need to be a corporate giant to save big on distribution costs. By marketing directly to customers, companies can reap the benefits of significant savings opportunities” (Durmaz & Tasdemir, 2014).  By identifying and marketing directly to these customers, the company can maximize its profits and avoid the risk of losing customers due to the increased costs associated with a longer distribution chain.


In conclusion, Acron Group has done an excellent job of appropriately using distribution chains to internationalize its products.  Moreover, it has made many sound decisions to include partnering with well-established intermediaries and distributing its products throughout China, its largest competitor.  There is little room for improvement in this sphere.  It is well on its way to fully benefiting from internationalization norms and trends.  Nonetheless, several shortcomings were identified that should be carefully considered if the company hopes to compete in the international marketplace and not be put at risk of an alternative product taking over.  The first recommendation for improving the business’s internationalization strategy would be to form more and better joint ventures with American businesses. A second internationalization strategy the company should consider is to form more direct relationships with high end customers so as to avoid losing money with middle men.  If the company takes advantage of these recommendations and employs them, then it is likely that it will continue to reap the benefits of globalization and internationalization trends.




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