International Business In Russia
Introduction
There are a number of misconceptions about Russia as a business destination. Some people believe that management is in Russia, an overly simple process and that everything you might need a few good links, or simply meeting the right people are. On the other hand, others believe that in Russia, it is almost impossible to do business, and that companies not regulated by the basic principles of economics. While these latter claims may have some validity in certain respects, it is important to understand that they are not the business climate, market opportunities and entry strategies are needed to represent it in Russia.
Russia as a business destination requires its own rules. One must be willing to do business in an unconventional manner. Furthermore, one should be prepared for the differences that occur across different sectors and also has a number of geographical areas. In Russia, some areas, over-supply, while others are undersupplied. The latter could mean either be a rewarding business opportunities in specific cases or areas they could be ignored, because if the Russians do not see themselves in it possible, then make a foreigner feel that he / she can turn it. (Fetsenko, 2008)
Business in Russia is not for the faint hearted. It requires a high degree of imagination and resilience. But after training, all these properties, it can be too easy to enjoy the benefits of investing in this country. Therefore, you should probably be equipped with the business information, market research, import and export opportunities and market strategies needed to succeed in Russia, prior to risk it. These are all aspects that are addressed in the report below.
Market Intelligence Report (MIR)
The Russian people
There is instead a series of misunderstandings of the West over the Russian people. Some of them believe that the Russian cities also prone to crime and that they lose their property at any time. However, to compare the crime rates in the United States are safer, the Russian cities.
Other people believe that in Russia, organized crime, the basic principles of economics and overruled can not be expected to make substantial profits without finding the cooperation with such prominent criminals. However, this is another mistake, you can still conduct business in Russia without standing to members of organized crime. While these questions remain in certain sectors of the economy, others are not affected. Consequently, in shops where business people have to deal with the sectors that are made by those sorts of issues affect familiarize interested. (Donga, 2008)
It should also be noted that not all Russian people interested in accepting bribes. The case of corruption is a growing concern among the business people from the U.S., because most of them can not understand the dynamics of the Russian economic environment. However, this is a problem that has exaggerated by many people. In fact, this could easily exposed to a series of cultural shocks that you get as soon as they enter a foreign country.
However, it should be noted that the Russian people, not as expressive as most other people, especially when they encounter strangers. This kind of attitude resulted from the communist regime that oppressed its citizens’ freedoms. Therefore, it would be useful to remember that aspect in dealing with the Russian people. It can not be able to get answers from them may at first hand, it may be necessary to earn a first for their confidence before they can think of the opening.
It should be noted that the Russian way of life is a little different than the American. Consequently, foreigners need to understand that not everything in Russia will be synonymous with what to use them in their own countries. This means that a little for the inconvenience that come with change should be ready. The Russian people eat different foods, they enjoy various leisure activities and transactions a little differently than the Americans. It would therefore be a more appropriate these cultural differences not by comprehensive deal by whining and complaints about them. (Reykjavík, 2006)
The Russian people are different from the Americans, because their perceptions of contracts are quite peculiar. The majority of Russians regard the treaties as statements that include the mutual intentions. So if something happens to change these intentions, then the Russians can not be required to meet the conditions of the contract. This is a completely different mentality from the American definition, since the Americans more concerned with the conditions of the contract and the intricate details that to govern them. It should be noted that the Russians, more emphasis on the relationships that originated from the Treaty, of which the particular details.
Russians are well educated people. They are exposed to a wide range of media platforms, and books, they are also good researchers and scientists. Therefore, one should not assume that they can not get a positive response of the Russian people to the company. In fact, most of them good with foreign languages and can also be motivated to fulfill. However, care should be taken by Western managers, especially if the work requires a lot of innovation. The Russians were not their own decisions during the communist regime used because they would be punished for it. Consequently, the American investors need to inform their Russian workers about their expectations and whether they expect their employees engaged in innovation.
The economy
The Russian economy has rapidly emerged from the downturn in the nineties and in the late nineties. At the time, was the country into the twenty-first century, it was boasting a growing economy, while their colleagues were fighting inflation. The Russian economy is unique in that, while other countries are trying to deal with rising oil prices, is benefiting the country. Because the country is located in the rich oil supplies, then it is at the opposite end of the global oil crisis. (Ganske, 2007)
Our country imports, exports due to the behavior of the Russian ruble strengthened. The following description of this pattern
1998-9. 71 rubles per dollar
1999-24. 6 rubles per dollar
2005-28,3 rubles U. S. Dollar
The overall impact of this week’s ruble for the largest share of the goods to have been done in this country, industrial products and most of them are manufactured locally. It is therefore imperative for investors this sector into account.
In addition, the Russian investment companies have rapidly grown significantly in recent years. This is due to greater utilization of their capacities. Also, the government minimizes tax burdens on its population and also expand their employment opportunities. However, the purchasing power has not reached a similar level by rising prices for raw materials. Moreover, inflation has been much less taken over the past five years due to the monetary policy by the current government regime. The following overview of some of the key indicators for the Russian economy over the past five years
Source: From http://info. HKTDC. com / emergingmarketguide /
The Government
The Russian political scene has experienced many changes in the last ten years. In the nineteen nineties, it was controlled by its President Yeltsin, and these were not good times for the company. However, after the Yeltsin era, there was the emergence of the Putin era. This time is much more successful than the others, because the number of reasons. Following are some of the characteristic of this time;
These are all aspects that increased investment and improved performance for entrepreneurs, particularly in relation to promote international business. Because of these changes, the GDP of the country’s numerous changes in recent years has changed significantly. For example, in 1999, it’s a six point four per cent growth recorded in 2000 reported a growth rate of ten percent in the following years, it has to grow at a constant speed. (HKTDC, 2008)
The Russian government has been somewhat criticized for the method of governance. While it is a known fact that Russia has not the political environment an exemplary case, one can still proceed with the economy in this country regardless of the good or bad political situations. In fact, it will largely affect the mood, whether they can about their business without going impact on politics in the country or vice versa.
It should be noted that the Russian government has only allowed a free market economy in the last ten years. Consequently, most of the industrialists and businessmen who are active in this country, very inexperienced in commercial ventures and also in the international business sectors, the application of basic economic principles.
Technology Status
In the past, the Russian government has not very keen on the issue of information technology. However, this trend is slowly changing due to the fact that the country has large amounts of tax incentives for IT-added specialty companies. In addition, most local hardware manufacturers are increasing. In fact, the country has forecast an IT growth rate of fourteen percent until 2011. This also means that the country will grow from nine billion dollars in this sector of the ten billion dollars registered in the past year. (Tuohy, 2008)
The government also has plans that are now underway, it will tax rebate for families affected by as much as Thirty-nine percent when families purchase computers. This also means that it takes to rise rapidly among members of the population. There are also some tax cuts that were set up for vendors in the hardware sector. Consequently, would be a relatively easier in this area now than in the past. (Kitov, 2007)
The development of technology has also improved dramatically through the establishment of an initiative in 2007. The initiative has been a greater use of computers in the rural parts of the country. This was done by reducing the cost of purchasing PCs in the field. Consequently, many people were encouraged to participate in it, and this has come a long way in improving the economy of this country.
Business Environment Analysis Report (Bear)
Russia experienced a series of economic reforms in recent years. Therefore, the country is now stable currency he has stabilized the ruble is now. This means that foreign investors would be all that is interested in business, a better use of succeeding if they focused on exports and imports. Imports to Russia are very expensive. Therefore the management should consider, goods locally or with locally made goods in order to minimize their costs for businesses.
It should also be noted that these economic reforms have now created feasibility in areas with poor performance so far. For example, it is now advisable to consider the retail sector especially with regard to consumer goods. Moreover, it is now also consider favorable to themselves in machinery. The likely cost sector is also increasingly lucrative and would be a profitable business if they are considered entrepreneurs.
Before running a business in Russia, it is looking for an essential element for the local partners. There are a number of advantages that arise from the search for a good local partner, and these could be invaluable for the company. Some of them include;
-Understand bureaucracy in the country
-You know the dynamics of the market
-Are you familiar with staffing
-Understand the total cost of doing business
-Understand common mistakes made by first time investors
-You know how the local rental costs are settled
-Can provide information on taxes
All this information by foreign companies only through the cessation of services of these local personnel to be accessed. Thus one can save time and resources. It should be noted that more local partner in Russia is perhaps one of the biggest challenges of doing business in this country. This is about saving these partners, the foreign investor is an active in trying to to the local consumers, suppliers or other players to see which are involved in the business process. (Vista, 2008)
The Russian economy today from what most people are accustomed to different. For example, in Russia should be willing to pay more for certain items and to pay less for the others. The country’s economy can not be labeled as a completely liberal. Therefore, one should not expect the goods to be free flowing it is. In other words, it requires for an investor to prepare for the lack of competition in basic services. For example, the real estate industry under the U.S. standards. Consequently, it would be for affordable rent their premises rather than buy them.
But even in western-style rental offices are not as cheap because the planes are equipped with the charges in London and Tokyo are synonymous. Even if an investor is only spending a short time in the country and they must be in the hotel services, then they should be prepared separately for Western-style hotels to pay. In addition, international calls are very expensive to pay in comparison to what other people in the country.
The American definition of decent business lunch would be more expensive in Russia than it would be like back home. For example, it is difficult for a meal that costs get less than fifty dollars per head if they are looking for Western-style servings. (Reykjavík, 2006)
It is also important to note that in Russia, transport costs are relatively fair. It would be a price only five hundred U.S. dollars to fly to almost all areas of the country. Furthermore, if one chooses to use the trains, then they can pay less than fifty dollars to go to any part of Russia.
In the area of labor costs, Russia, wages are not as they are typical of other Western colleagues. In other words, it depends on what foreign investors are looking for in this country. When does a bilingual staff, then it may be necessary to await the high costs there. Moreover, if in some big cities like Moscow, then the labor costs are significantly higher than in rural areas. The latter costs depend on the economic side, that it specializes in. If people in an area where the oil is rich, then you would pay is a lot more for their labor costs than in any other part of the world. However, if one was looking for workers in an industrial city, they would have to pay their workers much less.
Furthermore, it is necessary to invest in labor costs if they are dealing with certain types of goods or services. If you look at the IT sector, then the prices may vary according to the savings which one tries to. For example, in the United States in comparison, it is relatively inexpensive to get a computer programmer. However, if these labor costs when compared to the Asian computer programmer, then Russian labor costs are considered expensive. This is because in Russia, programmers are not in high demand in comparison to their Western counterparts. Consequently, they have little use to negotiate their salaries.
If a setting considered a brand in Russia, it would not result in excessive labor costs. This is because in Russia, marks are not as competitive as they are in the United States. Consequently, an entrepreneur who is the objective of creating awareness, it is not particularly difficult to do so in Russia than in other parts of the world, especially in the western world. (HKTDC, 2008)
All in all, may be the cost of doing business in Russia is more seen as an opportunity rather than a cost. All extra work or costs in the production cost can be offset by the proceeds arising from the activity. Therefore, one should be willing to part with huge sums of money when they get the same huge returns at the end.
Report on opportunities for market entry (ROM)
Certain sectors have been increasingly seen as strongholds of the Russian economy as compared to others. Oil services and products are particularly rewarding, in particular with regard to imports. This is because Russia is rich in natural resources, and these have the potential of high rewards for any international business person to earn.
In addition, IT services can be a hub for an international businessman who could provide these services to locals be interested. Since the government has offered numerous incentives in this case, one would certainly be great chances of success if they focused on information technology.
Since Russia is one of the most important countries in Europe, when it invested in to scientific research, then, in such a sector could be a good business to earn rewards, the more so if this person works for the export related scientific products. (Reykjavík, 2006)
Purchasing power is relatively stable in Russia. This was initiated as a result of the nature of the reform of the current government regime. Therefore, it would be advisable to consumer goods to examine, especially in the food sector. To take but a good fruit, you should consider the same products in Russia and not outside. This is because it would be too expensive to import the commodity. Examples of consumer products that companies are focusing on international motor vehicles and electronics.
Market Entry Strategy Assignment (MESA)
In order to do so in Russia, it would be plausible, with a strategic partner that they will facilitate the transition into the area. It should be noted that the market entry strategy can be either through cooperation with local Russian companies or the use of international companies that have worked in Russia for a long time. Since in this case relates to consumer goods, then it would be advisable that an international company working in Russia to use more than ten years. On example is the Business Information Service for the Newly Independent States (BISNIS). The company prides itself, fifty thousand clients, international companies have introduced.
Consequently, it has the necessary experience to assist an entrepreneur in developing their business in Russia. The company has been home to the Soviet Union since 1992, when it was founded. This means that the company has been responsible for more than three billion U.S. dollars worth of exports to the investors in the overseas territories. Moreover sixty-three percent of investors in Russia have been as a direct result of what might offer these strategic companies.
The first issue, which is then taken from the entrance to attack is always a market report on the specific business area. This will be won by the strategic partner BISNIS. Then it will be important to understand the dynamics of the Russian economy will be those offered by the latter partner.
There will also be important to understand the financial difficulties of conducting business in Russia. The finance can be very difficult there. So this is a problem that will be taken by the strategic partner in attack.
It should also be favorable to use large industrial set ups rather than setting up a small or medium scale enterprises during market entry. This is because of the economy are the biggest climbers in Russia from the former area, it could therefore be problematic to try to venture into an area that does not have a lot of support from the Government through the small and medium enterprises. (Reykjavík, 2006)
The products in Russia will be created partly in Russia and also marketed internationally. Thus it will be necessary to keep track of the intricate details of the world, exchange rates, consumption patterns of goods, among other items which may affect the business at the end. It will be crucial to provide high quality products for the product, exceeding the local norms and creating a lucrative area of business in Russia.
Conclusion
Russia is an emerging economy and would be a very lucrative investment area. This is because the country is endowed with natural resources. The business environment is quite possible. There will be some of the negative statements made by western media stereotypes about Russian business people and not really represent the average Russian.
Some of the main imports include live it up, motor vehicles and information technology. Exports, which yields in Russia are the oil yield of products and services.
Reference
Donga (2008): North Korean Thriving companies in Russia, from http://english. donga. com
Fetsenko, V. (2008): Russia’s Unique Business Environment, from http://www. executiveplanet. com / index. php? title = Russia: _Russia’s_Unique_Business_Environment_-_Part_
Reykjavik, T. (2006): Aspects of the business environment in Russia, a report for the Trade Council of Russia, 12, p. 98-105
HKTDC (2008): Re-emergence of the Russian economy, from http://in. HKTDC. com
Kitov, V. (2007): Russian software and hardware companies aim to copy the success of India “to which Russia Journal, 4, 22
Tuohy, P. (2008): The Russian Information Technology Report, http://wtexecutive. com
Vista (2008): How do you make a business in Russia, Foreign Business Support Report, 12, 98
Ganske, C. (2007): Western media is missing the real story in Russia, Discovery Institute report, 13, 27