When plan becomes market : A successful company’s change. The case of Krenholm, Estonia
Context: The challenges in going from a system of planned economy to a free market system are without a doubt enormous both for countries and individual companies. One company that has been in this situation is Krenholm. Krenholm is an Estonian textile company. When Estonia gained its independence in 1991, Krenholm faced a completely different environment with no customers and market economy. After four very difficult years, Krenholm was bought by a Swedish company, Borås Wäfveri AB in 1995. At this point Krenholm was a state owned company in absolute chaos. A leap forward from that point in time brings us to the year of 2000. In this year Krenholm shows a profit of 21 Million SEK.
Purpose: The purpose with this study is to investigate how a company can successfully change from operating in a planned economy to operate with profit in a market economy.
Scope: The major time focus in this thesis is 1995 - 2002 and on a micro level of changes at Krenholm. The years from 1944 to 1995 provide a macro level background of the Soviet Union period and the transition of Estonia towards market economy. These periods are only analyzed in short. When analyzing Krenholm in the areas of managerial resources, strategy and structure, we will focus on top level management and exclude the more operational management conducted by managers on lower levels. In the same way we will solely research strategy on a high level and exclude the more detailed strategic planning on the operational level. Organizational culture will no be considered.
Method: To be able to fulfill our purpose we committed a case study of Krenholm, Narva. In our view Krenholm is a very suitable object of study, as an industrial company that has succeeded in adapting itself from being a company in a planned economy to being a profitable company in a market economy. We started of by acquiring an excellent preunderstanding. The most important step in doing so was an initial trip a trip to Krenholm. When ourfocus and frame of references were ready we went back to Krenholm and collected our primary data through interviews with key personnel. In total, 11 interviews were conducted at Krenholm; these included all the directing managers at Krenholm. We also conducted one mail interview with Narva Business Center and had an interesting meeting in Narva with a consultant at Krenholm from Borås Wäfveri. When we returned to Sweden from Estonia our empirical findings were analyzed with the help of our frame of references and we reached our conclusions.
Conclusions: We conclude that the characteristics of the industry that Krenholm was developed in many respects helped the company to succeed in its successful adaptation to the market economy environment. The single most important factor in Krenholms successful adaptation was however the privatization of the company. We also conclude that in the transition it is vital to develop the managerial resource base immediately in order to be able to survive and also later to develop competitive strategies for the future. On a micro level we found that it seems to be of vital importance who guides a company in the times off difficult and revolutionary change
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