Introduction

Europe is typically seen as an unified region under the European Union's flag of common trade and currency that make it an easy market to serve, work in and maintain. Language barriers are the most common problem at any companies, along with differences in tax laws. Managing that complexity has long been one of Europe's core competencies. In many ways, the European market is very complex, but when you deal with markets outside EU it is an always different story.

This storyboard focuses on perception/expectation. The problem is that many companies with little or no experience in foreign markets tend to consider overseas markets habit, perception and business traditions from their country-residence company point of view. In other words, they expect to see the same way of appreciation, understanding, business environment, etc.

The inspiration for this story board comes from a trip with business partners who told the story about their experience in Russia. The company was looking to be present in the local market where they already rent expensive office space and work with some local staff. For the first order, they delivered a couple of pallets with expensive products for delivery to Russia. The local market authorities require a large number of documents to be able to clear the goods for customs. This is contrast to the EU, where only a few documents are required and there is less bureaucracy. Due to the way the company handled the situation the goods can not pass customs and are stored at very high costs at the customs area.

Background Russia

Since the collapse of the Soviet Union, Russia has become an attractive ground for business and management adventurers. Management consultants, business people, educators, and economists have rushed to do business in the New Russia, taking advantage of the huge sums of money poured into Russia by global investors. But dealing with a fragile, volatile and unpredictable economy is only part of the difficulty facing those wishing to take advantage of a bargain-priced if risky marketplace. Westerners are often faced with serious and sometimes intractable communication problems. The differences in economic and political systems, infrastructures, national and business cultures and managerial attitudes and habits present difficulties not previously encountered elsewhere.

Exporting to Russia is not without risk

The average new business applicant in Russia must deal with a multitude of agencies at both the federal and the local levels and obtain approval of myriad registration and licensing forms. In countries like Russia (high complexity ranking (1)) you have to be directly presented locally. There are number of ways to establish yourself locally (2) and depending on the industry in which you want to be presented and investments available the company has to choose the best alternative. Another option is to use a distributor. This is less expensive in terms of capital investment and ongoing cost, but carries a price of a different nature: the effective loss of the territory and control of customers. Either way, getting into export is a risky business.

The best way to obtain broad information concerning the market is to contact local Consulting companies (PricewaterhouseCoopers, Erns&Young, and Cap Gemini). Those well known agency is already widely presented in many Russian regions.
Nevertheless to mention that Russian business culture is hieratical structured. Decision making people higher up in the hierarchy have authority over their subordinate. More information about Russian business culture is usually available on I-net (3).

Corruption as a barrier to business entry in Russia—as in many other transition economies—is pervasive: virtually all firms pay bribes to tax inspectors, customs officers, and a host of local bureaucrats who visit firms several times a year.

(1) Doing business in Russia
(2) Hodgetts, Luthans, Doh, International Management, Chapter 9
(3) http://www.homeworklang.com/russian-business.htm

Summary of the challenges facing companies doing business in Russia

Summary of the challenges of doing business in Russia:
- Corruption and bureaucracy at any level of the government;
- Disparity, compare to EU and USA in economic and political systems, infrastructures, national and business cultures;
- Limited opportunities for international companies with non local headquarters to have a good overview and market insight;
- Russia’s cash economy – and its porous legal and tax systems – allow, if not encourage, cutting corners;
- Unreliable and ineffective law system;
- Russia’s professional class is expert at cheating the system – a science perfected in the Soviet period.

However like usually the place where the higher risk has a higher payoff, so understand Russia today it is crucial for any MNC. Only then can you have a stake in its future. In order to have any hope of meeting long-term business objectives in this most restless of countries, it is essential to build intense interpersonal relationships. Knowing how to do this requires an informed understanding of Russia's past as well as an appreciation of the complexities of the present transition to market-economy conditions and insights into the Russian business mentality. Without such knowledge, all forms of management cooperation with Russia are placed under severe stress.