Aggressive expansion in Europe
With the creation of SAT's and Televerkets own manufacturing plants, Lars Magnus Ericsson risked losing the domestic market. At the same time, protectionist policies intended to favor domestic manufacturers were gaining strength in many countries. In Russia, pressure was put on Ericsson to open a manufacturing plant in St Petersburg. Under these conditions, Lars Magnus Ericsson felt that it was necessary to satisfy the Russians? After conducting assembly operations in leased premises for several years, Ericsson opened its own telephone plant in St Petersburg in 1900.
The Russian factory became Lars Magnus Ericsson's baby. At one time, he even considered transferring core operations from Stockholm to St Petersburg. The issue was dropped in 1901, however, when Ericsson once again won SAT as a customer in both Sweden and Russia.
Ericsson's Russian operations experienced strong growth and were normally profitable, particularly during World War I. During the October Revolution, however, all of Ericsson's Russian assets, which together with accounts receivable were estimated at SEK 20 million, were nationalized. The assets included not only the telephone plant in Petrograd (as St Petersburg was renamed), but also the newly established Telefonbyggnads AB in Moscow. Several attempts by Ericsson to negotiate with the Soviet authorities proved fruitless.
Ericsson also had extensive operations in Great Britain at an early stage. Around the turn of the century, the British market accounted for half of the company's total sales. To serve its British customers, Ericsson opened a sales office in London in 1898.
It was soon evident that the sales office was not sufficient for the large British market, which lacked a significant domestic telephone industry. As in Russia, Ericsson considered it important to meet British demands for domestic manufacturing capacity. An opportunity to establish operations in England arose in 1903, when Ericsson's largest customer, the National Telephone Company, sold its manufacturing plant in Beeston near Nottingham to the British L M Ericsson Manufacturing Company.
This company was initially operated jointly by Ericsson and National Telephone. When National Telephone transferred telephone operations to the British Post Office in 1911, British L M Ericsson acquired the operator's shares. As of 1911, the British Post Office became British L M Ericsson?s largest customer.
British L M Ericsson proved to be a profitable unit in Ericsson's operations. The Russian and British subsidiaries were on the whole successful with extensive and profitable sales. A substantial portion of the profits was paid as dividends to the parent company in Stockholm. Russian operations, however, were abruptly terminated by the Russian Revolution in 1917.
Before the First World War, Ericsson had already started operations in Paris, Vienna and Budapest. Despite the difficulties that the war and monetary instability created initially for Ericsson's subsidiaries in Austria and Hungary, both companies were able to report relatively large profits during their first ten years of operation. The French subsidiary, however, which was both larger in scope and still in the organizational phase at the war's outbreak, did not fare as well. Due to shortages of both labor and materials, operations were discontinued in whole or in part during the war. In the first ten years of the company's operation leading up to 1920, Ericsson in Paris only reported a profit in 1916.
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