| Introduction | | | | bet at succeeding if they concentrated on exports |
| There are a number of misconceptions about Russia | | | | rather than imports. Imports to Russia have been |
| as a business destination. Some people believe that | | | | very expensive. Consequently, managers should |
| conducting business in Russia is an all too easy | | | | consider creating goods locally or using locally made |
| process and that all it takes are some good | | | | supplies so as to minimize their costs of business. |
| connections or simply meeting with the right people. | | | | It should also be noted that these economic reforms |
| On the other hand, others believe that in Russia, it is | | | | have now created feasibility in previously low |
| almost impossible to do business and that enterprises | | | | performing sectors. For instance, it is now advisable |
| are not governed by the basic principles of | | | | to consider the retail sector especially with regard to |
| economics. While these latter assertions might have | | | | consumer goods. Additionally, it is now also favorable |
| some validity in certain respects, it is essential to | | | | to consider dealing in manufacturing equipment. The |
| understand that they do not represent the business | | | | financial investment sector is also becoming |
| climate, market opportunities or entry strategies | | | | increasingly lucrative and would be a profitable |
| required to make it in Russia. | | | | venture when considered by entrepreneurs. |
| Russia as a business destination requires its own set | | | | Before one conducts business in Russia, it is essential |
| of rules. One needs to be ready to do business in an | | | | for one to look for local partners. There are a |
| unconventional way. Additionally, one should be ready | | | | number of advantages that can emerge out of |
| for the disparities that occur across various sectors | | | | finding a good local partner and these could be |
| and also across a number of geographical areas. In | | | | invaluable to the business. Some of them include; |
| Russia, some areas are oversupplied while others are | | | | -They understand bureaucracy in the country |
| undersupplied. The latter could either act as rewarding | | | | -They know the market dynamics |
| business opportunities in certain instances or they | | | | -Are familiar with staffing arrangements |
| could signify areas that need to be ignored because | | | | -Understand overall business costs |
| if the Russians themselves do not see any potential | | | | -They understand common mistakes made by first |
| in it, then what makes a foreigner think that he/she | | | | time investors |
| can turn it around. (Fetsenko, 2008) | | | | -They know how local rent costs are settled |
| Business in Russia is not for the feint hearted. It | | | | -Can give information about taxes |
| requires a great deal of imagination and resilience. But | | | | All this information can be accessed by foreign |
| after exercising all the latter traits, it can then | | | | companies simply by hiring the services of these local |
| become easy to enjoy the rewards of investing in | | | | personnel. Consequently, one can save on time and |
| this country. Consequently, one should be well | | | | resources. It should be noted that getting local |
| equipped with all the business environment | | | | partners in Russia is perhaps one of the biggest |
| information, market intelligence, import and export | | | | challenges of doing business in this country. This is |
| opportunities and market strategies required to | | | | because these partners can save the foreign investor |
| succeed in Russia before venturing there. These are | | | | a lot of hustle when trying to look for local |
| all aspects that will be covered in the report below. | | | | consumers, suppliers or other stakeholders that will |
| Market Intelligence Report (MIR) | | | | be involved in the overall business process. (Vista, |
| The Russian People | | | | 2008) |
| There are a number of misconceptions held by | | | | The Russian business environment is different from |
| westerners about the Russian people. Some of them | | | | what most other people are accustomed to. For |
| believe that Russian cities are too susceptible to | | | | instance, in Russia, one ought be ready to pay more |
| crime and that one would lose their property at any | | | | for certain items and pay less for others. The |
| one time. However, compared to crime levels in the | | | | country's economy cannot be labeled as a totally |
| United States, Russian cities are safer. | | | | liberal one. Consequently, one should not expect that |
| Other people believe that in Russia, organized crime | | | | goods will be free flowing there. In other words, it |
| overrules the basic principles of economics and that | | | | may be necessary for an investor to prepare for lack |
| one cannot expect to find considerable profits | | | | of competition on basic service provision. For |
| without collaborating with these high profile criminals. | | | | instance, the real estate sector is below the US |
| However, this is another misconception; one can still | | | | standards. Consequently, it would be affordable for |
| conduct business in Russia without having to involve | | | | one to rent their business premises rather than |
| members of organized crime. While the latter issue | | | | purchase them. |
| may exist in certain sectors of the economy, others | | | | However, even renting western style offices may |
| are not affected by it. Consequently, businessmen | | | | not be that cheap because their levels are |
| interested in doing business there need to familiarize | | | | synonymous with charges in London or even Tokyo. |
| themselves with the sectors that are untouched by | | | | Also, if an investor is merely spending a short time in |
| such kinds of issues. (Donga, 2008) | | | | the country and they are in need of hotel services, |
| It should also be noted that not all Russian people are | | | | then one ought to be ready to pay extra for |
| interested in taking bribes. The case of corruption has | | | | western style hotels. Additionally, international calls |
| been a rising concern among business men from the | | | | are quite costly in comparison to what other persons |
| US because most of them may not understand the | | | | in the country pay. |
| dynamics of the Russian business environment. | | | | The American definition of decent business meals |
| However, this is an issue that has been exaggerated | | | | would be more costly in Russia than it would be back |
| by many individuals. In fact, this could simply be a | | | | home. For instance, it is difficult for one to get meals |
| result of the culture shock which one gets exposed | | | | that cost less than fifty dollars per head if they are |
| to as soon as they enter a foreign country. | | | | looking for western style servings. (Reykavik, 2006) |
| It should however be noted that the Russian people | | | | It is also essential to note that in Russia, |
| are not as expressive as most other individuals | | | | transportation costs are relatively fair. It would cost |
| especially when they meet strangers. This kind of | | | | one a mere five hundred dollars to fly to almost all |
| attitude emerged out of the communist regime that | | | | areas of the country. Additionally, if one chooses to |
| oppressed its people's freedoms. Consequently, it | | | | use trains, then they can pay less than fifty dollars to |
| would be wise to remember this aspect when dealing | | | | go to any part of Russia. |
| with the Russian people. One might not be able to | | | | In terms, of labor costs, Russia's wages are not as |
| get responses out of them at first hand, it may be | | | | typical as they are for other western counterparts. |
| necessary for one to earn their trust first before | | | | In other words, it depends on what foreign investors |
| they can think of opening up. | | | | are looking for in this country. If one needs bilingual |
| It should be noted that the Russian way of life is | | | | personnel, then it may be necessary to expect high |
| slightly different from the American one. | | | | costs there. Also, if one is located in some of the |
| Consequently, foreigners need to understand that | | | | major cities such as Moscow, then wage costs will be |
| not everything in Russia will be synonymous to what | | | | much higher than in the rural areas. Also, the latter |
| they are used to in their own countries. This means | | | | costs depend on the part of the economy that one |
| that one should be ready for the minor | | | | is specializing in. If one is situated in an area that is oil |
| inconveniences that come with change. The Russian | | | | rich, then one would have to pay much more for |
| people eat different food, they enjoy different | | | | their labor costs than in any other part of the world. |
| leisure activities and conduct business a little | | | | However, if one was looking for workers in an |
| differently from the Americans. It would therefore | | | | industrial city, then they would have to pay their |
| be appropriate for one to deal with these cultural | | | | workers much less. |
| differences by embracing them rather than by | | | | Additionally, it is necessary for one to invest in labor |
| whining and complaining about them. (Reykavik, 2006) | | | | costs when they are dealing with certain forms of |
| The Russian people differ from the Americans | | | | goods or services. When one deals with the |
| because their perceptions of contracts are quite | | | | information technology sector, then prices may vary |
| peculiar. Most Russians regard contracts as | | | | depending on the savings that one is looking for. For |
| statements which contain mutual intentions. | | | | instance, compared to the United States, it is |
| Consequently, if something happens to alter those | | | | relatively inexpensive to get computer programmers. |
| intentions, then the Russians may not be obliged to | | | | However, if one compares these labor costs to the |
| meet the terms of the contract. This is a totally | | | | Asian computer programmers, then Russian labor |
| different mindset from the American definition | | | | cost may be deemed as expensive. This is because |
| because Americans are more concerned with the | | | | in Russia, computer programmers are not in high |
| terms of the contract and the intricate details that | | | | demand compared to their western counterparts. |
| govern it. It should be noted that Russians place | | | | Consequently, they have little leverage to negotiate |
| more emphasis on the relationships that emanate | | | | their salaries. |
| from the contract rather on the particular details of it. | | | | When one considers setting up a brand name in |
| Russians are well cultured persons. They are exposed | | | | Russia, it would not entail extreme labor costs. This is |
| to a wide range of media platforms and books; they | | | | because in Russia, brands are not as competitive as |
| are also good researchers and scientists. | | | | they are in the United States. Consequently, an |
| Consequently, one should not assume that they | | | | entrepreneur who has the aim of creating brand |
| cannot get any positive responses from Russian | | | | recognition may not find it particularly difficult to do |
| people in terms of business. In fact, most of them | | | | so in Russia than in other parts of the world |
| are good with foreign languages and can be well | | | | especially in the western world. (HKTDC, 2008) |
| motivated to perform. However, care should be | | | | All in all, business costs in Russia may be regarded as |
| taken by western managers especially when work | | | | more of an opportunity than a cost. Any extra |
| involves a lot of innovation. The Russians were not | | | | charges incurred in labor or costs of production may |
| used to making their own decisions during the | | | | be offset by the returns that emerge out of the |
| communist regime because they would get punished | | | | business. Consequently, one should be prepared to |
| for doing so. Consequently, American investors need | | | | part with huge sums of money if they are to get the |
| to inform their Russian workers about their | | | | same huge returns in the end. |
| expectations and whether they would anticipate their | | | | Report on opportunities for Market Entry (ROME) |
| workers to exercise innovation. | | | | Certain sectors have been emerging as strongholds |
| The economy | | | | within the Russian economy in comparison to others. |
| The Russian economy has quickly emerged from its | | | | Oil related services and products are particularly |
| downturn in the nineteen nineties and in the late | | | | rewarding especially in terms of imports. This is |
| nineties. By the time, the country was entering the | | | | because Russia is richly endowed with natural |
| twenty first century, it was boasting of a growing | | | | resources and these have the potential to earn high |
| economy whereas their counterparts were fighting | | | | rewards for any international business person. |
| off inflation. The Russian economy is unique in that | | | | Additionally, Information technology services can be a |
| while other countries are trying to cope with rising oil | | | | hub for an international businessman who may be |
| prices, this country is benefiting from it. Because the | | | | interested in offering those services to locals. Since |
| country is rich in oil supplies, then it is on the opposite | | | | the government has offered numerous incentives in |
| end of the global oil crisis. (Ganske, 2007) | | | | this case, then one would certainly have high chances |
| The country's local imports have strengthened | | | | of succeeding if they focused on information |
| against exports because of the behavior patterns of | | | | technology. |
| the Russian Rouble. The following is depiction of this | | | | Since Russia is one of the most notable countries in |
| pattern | | | | Europe when it comes to scientific research, then |
| 1998- 9.71 Roubles per US dollar | | | | investing in such a sector could earn an entrepreneur |
| 1999-24.6 Roubles per US dollar | | | | good rewards, more so when the latter individual is |
| 2005-28,3 roubels per US dollar | | | | working on exporting scientific related products. |
| The overall effect of this week rouble is that the | | | | (Reykavik, 2006) |
| highest percentages of commodities that have been | | | | Spending power has relatively stabilized in Russia. This |
| doing well in this country are industrial products and | | | | was as a result of the kind of reform instituted by |
| most of them are being produced locally. It is | | | | the current government regime. Consequently, it |
| therefore imperative for investors to consider this | | | | would be advisable to consider consumer items |
| sector. | | | | especially in the food sector. However, in order to |
| Furthermore, Russian business investments have | | | | reap good rewards, one ought to consider producing |
| grown tremendously over the past few years. This is | | | | those same items within Russia and not outside. This |
| as a result of greater utilization of their capacity. Also, | | | | is because it would be too costly to import the |
| the government minimized tax burdens amongst its | | | | commodity. Examples of consumer items that |
| populace and also expanded their employment | | | | international businesses could focus on include motor |
| opportunities. However, spending power has not | | | | vehicles and electronics. |
| reached similar levels owing to increasing prices of | | | | Market Entry Strategy Assignment (MESA) |
| commodities. Furthermore, inflation levels have been | | | | In order to do well in Russia, it would plausible to link |
| much lower over the past few years owing to the | | | | up with a strategic partner that will ease one's |
| monetary policies instituted by the respective | | | | transition into the area. It should be noted that the |
| government regime. The following is summary of | | | | market entry strategy can either be through |
| some of the major indicators of the Russian | | | | partnering with local Russian firms or the use of |
| economy over the past five years | | | | international firms that have been working in Russia |
| Source: retrieved from | | | | for long periods of time. Since this case deals with |
| The government | | | | consumer products, then it would be advisable to |
| The Russian political scene has witnessed numerous | | | | utilize an international firm that has been working in |
| fluctuations over the past decade. During the | | | | Russia for longer than ten years. On such example is |
| nineteen nineties, it was controlled by its president | | | | the Business Information Service for the Newly |
| Yeltsin and these were not good times for the | | | | Independent States (BISNIS). The firm boasts of |
| business environment. However, after the Yeltsin era, | | | | having fifty thousand clients that have instituted |
| there was the emergence of the Putin era. This era | | | | international businesses. |
| is much more successful than the latter because of | | | | Consequently, it has the expertise required to assist |
| number of reasons. The following are some of the | | | | an entrepreneur in setting up their business in Russia. |
| characteristic of this era; | | | | The company has been dwelling on the Soviet Union |
| - Strong tax collection | | | | ever since 1992 when it was formed. This means |
| - Favorable business environment | | | | that the company has been responsible for over |
| - Lower personal income tax | | | | three billion dollars worth of exports to investors in |
| - Lower corporate taxes | | | | overseas areas. Also, sixty three percent of |
| - Sound economic measures | | | | investors in Russia were as a direct result of what |
| These are all aspects that encourage greater | | | | this strategic company could offer. |
| investment and better performance for | | | | The first issue that will need to be tackled prior to |
| entrepreneurs especially in relation to international | | | | entry is getting a market report on the specific |
| business. Because of these changes, the Gross | | | | business segment. This will be obtained from the |
| Domestic product of the country has undergone | | | | strategic partner BISNIS. Thereafter, it will be |
| numerous changes over the past few years. For | | | | important to understand the dynamics of Russia' |
| instance in 1999, it recorded a six point four percent | | | | business leads, these will also be provided by the |
| growth rate, in 2000, it reported a ten percent | | | | latter mentioned partner. |
| growth rate, in subsequent years, it has continued to | | | | It will also be important to understand the financial |
| grow at a steady pace. (HKTDC, 2008) | | | | intricacies of conducting business in Russia. This is |
| The Russian government has been somewhat | | | | because financing can be very tricky there. |
| criticized for the method of governance. While it is a | | | | Consequently, this is an issue that will also be tackled |
| known fact that Russia's political environment has not | | | | by the strategic partner. |
| been an exemplary case, one can still proceed with | | | | It should also be favorable to use large scale industrial |
| business in this country regardless of good or bad | | | | set ups rather than setting up a small or medium |
| political situations. In fact, one's frame of mind will | | | | scale enterprise during market entry. This is because |
| largely affect whether they can go about their | | | | the largest movers of the economy in Russia come |
| business without being affected the politics in the | | | | from the former sector, it could therefore be |
| country or vice versa. | | | | problematic trying to venture into an area that does |
| It should be noted that the Russian government has | | | | not have a lot of government support through the |
| only allowed free market economics over the past | | | | small and medium sized enterprises. (Reykavik, 2006) |
| decade. Consequently, most industrialists and business | | | | The products created in Russia will be marketed |
| men who operate in this country are highly | | | | partly in Russia and also internationally. Consequently, |
| inexperienced in commercial business ventures and | | | | there will be a need to keep track of the intricate |
| also in international business; areas that require | | | | details of the world currency rates, consumption |
| application of basic economic principles. | | | | patterns for the commodity among other items that |
| Technology status | | | | may affect the business in the end. It will be essential |
| In the past, the Russian government has not been | | | | to offer high quality items, for the product thus |
| very keen on the issue of Information technology. | | | | exceeding local standards and creating a lucrative |
| However, this trend is slowly changing owing to the | | | | area of businesses in Russia. |
| fact that the country has recorded high amounts of | | | | Conclusion |
| tax incentives for IT specialty companies. Additionally, | | | | Russia is an emerging economy and would be a very |
| most of the local hardware manufacturers are | | | | lucrative investment area. This is because the country |
| growing in size. In fact, the country has forecast an | | | | is endowed with natural resources. Also, its business |
| IT growth rate of fourteen percent by the year | | | | environment is quite feasible. Some of the negative |
| 2011. This is also means that the country will grow by | | | | assertion made by western media about Russian |
| nine billion dollars in this sector from the ten billion | | | | business men are stereotypical and do not actually |
| dollars registered last year. (Tuohy, 2008) | | | | represent the average Russian. |
| The government has also instituted plans that it will | | | | Some of the major imports that one can dwell on |
| rebate taxes for families by as much as thirty nine | | | | include motor vehicles and information technology. |
| percent if those families purchase computers. This | | | | Exports that can yield returns in Russia include oil |
| also means that IT use among members of the | | | | related products and services. |
| population will rapidly increase. There are also some | | | | Reference |
| tax cuts that have been instituted for suppliers in the | | | | Donga (2008): North Korean Businesses Thriving in |
| hardware sector. Consequently, one would have a | | | | Russia, retrieved from |
| relatively easier time in this sector presently than in | | | | Fetsenko, V. (2008): Russia's Unique Business |
| the past. (Kitov, 2007) | | | | Environment, retrieved from |
| The country's technological has also improved | | | | Reykavik, T. (2006): Aspects of the business |
| tremendously owing to the institution of an initiative | | | | environment in Russia, A report for the Trade council |
| in 2007. The initiative was to encourage greater | | | | on Russia, 12, pp 98-105 |
| computer usage in rural parts of the country. This | | | | HKTDC (2008): Re-emergence of the Russian |
| was done by reducing the cost of purchasing PCs in | | | | economy, retrieved from |
| those areas. Consequently, many individuals have | | | | Kitov, V. (2007): Russian software and hardware |
| been encouraged to participate in IT and this has | | | | firms aim to copy India' success, The Russia Journal, |
| gone a long way in enhancing this country's economy. | | | | 4, 22 |
| Business Environment Analysis Report (BEAR) | | | | Tuohy, P. (2008): The Russian Information |
| Russia underwent a series of economic reforms over | | | | Technology Report, |
| the past few years. Consequently, the country now | | | | Vista (2008): How to set up a business in Russia, |
| boasts of stable currency i.e. the Ruble as now | | | | Foreign Business Support report, 12, 98 |
| stabilized. This means that any foreign investor who | | | | Ganske, C. |
| is interested in doing business would have a better | | | | |