Market Research of Window Units and Doors Industry in Russia

This research paper analyzes macro-environmental and competitive forces in the Russian market and determines possible entry modes for a new company in the window units and doors industry. It also includes practical information on legal issues and regulatory organizations.

Market research of window units and doors industry in Russia
Elena Grishankova
Bachelor‟s Thesis
DP of Management Assistants
2010

Abstract
13 May 2010
Degree programme in Multilingual Management Assistants
Authors
Elena Grishankova
Group
The title of your thesis
Market Research of Window Units and Doors Industry in Russia
Number of pages
and appendices
61+3
Supervisors
Olli Laintila, Eija Kärnä
The purpose of this research is to analyze macro-environmental and competitive fo
Russian market and to determine possible entry modes for a new company. Some
information on legal issues and regulatory organizations is also included in the pa
create a comprehensive overview of any potentially influential factors.
The conceptual framework is based on the macro-environmental market research
Michael Porter‟s five forces framework and international entry strategies. This the
framework was used as a basis for formulating interview questions in order to per
qualitative, as well as quantitative, research. Quantitative data were collected from
and were primarily concerned with macro-economic factors. Interview questions w
structured and formulated differently for each of the three respondents, taking the
expertise into account in order to get the best results possible.
By the end of this research it was possible to conclude that economic and political
influential ones that a company in the Russian market will face. The most importa
five forces appeared to be direct rivalry and the distribution chain, the latter of wh
the supplier, manufacturer and buyer. The overall situation in the Russian market
window units does not appear to be that clear at the moment; the same can also b
prognoses for the future. For this reason, and also because of the lack of data rega
commissioning party‟s strategic objectives and assets, it was unfortunately impos
a clear plan regarding the development of strategy. However, this work offers way
information for a necessary deeper market research, which is needed in this area.
Key words
market research, five forces, doors and window units, entry mode, Russia

Table of contents
1 Introduction .............................................................................................................. 1
1.1 Aim of the study ................................................................................................ 2
1.2 Contents of the report ...................................................................................... 2
1.3 Commissioning party ........................................................................................ 3
2 Methodology ............................................................................................................. 5
3 Current situation in Russia ........................................................................................ 7
3.1 Main macroeconomic facts ............................................................................... 8
3.2 Trends and difficulties of the industry ............................................................ 10
3.3 SROs ................................................................................................................ 13
3.4 Finnish business on the Russian market ......................................................... 14
4 Concepts of market research .................................................................................. 15
4.1 Macro environment ........................................................................................ 15
4.2 Porter’s five forces .......................................................................................... 19
4.2.1 Direct rivalry ............................................................................................ 20
4.2.2 Bargaining power of buyers .................................................................... 21
4.2.3 Suppliers .................................................................................................. 22
4.2.4 Substitutes .............................................................................................. 23
4.2.5 New entries ............................................................................................. 23
4.3 Risks of the new market entry ........................................................................ 24
4.3.1 Political risk ............................................................................................. 25
4.3.2 Currency risk ........................................................................................... 26
4.3.3 Cultural diversity risk .............................................................................. 27
5 Strategy development ............................................................................................. 29
5.1 Determining mission and objectives ............................................................... 29
5.2 Choice of entry mode ...................................................................................... 30

5.3 Monitoring the strategy .................................................................................. 33
6 Competitive environment in Russia ........................................................................ 34
6.1 Direct competitors .......................................................................................... 34
6.2 Extended competition ..................................................................................... 36
6.3 General risks .................................................................................................... 38
6.3.1 Political risks ............................................................................................ 38
6.3.2 Currency risk ........................................................................................... 40
7 Legislation issues ..................................................................................................... 42
7.1 Visas and work permits for foreign employees .............................................. 43
7.2 Taxation ........................................................................................................... 44
7.3 Customs procedures legislation ...................................................................... 45
7.4 Information sources ........................................................................................ 47
8 Results ..................................................................................................................... 49
8.1 Validity and reliability ..................................................................................... 49
8.2 Macro and competitive environment ............................................................. 50
8.3 Entry modes .................................................................................................... 54
8.4 Secondary findings .......................................................................................... 55
9 Conclusion ............................................................................................................... 57
Bibliography .................................................................................................................... 59
Appendices ...................................................................................................................... 62
Appendix 1. Interview questions YIT........................................................................... 62
Appendix 2. Interview questions Finpro ..................................................................... 63
Appendix 3. Interview questions FRCC ....................................................................... 64

1
1 Introduction
The research paper you are about to read is meant as a practical and guide for a F
on what factors to consider when entering the Russian market. As the author of th
Russian origin it was natural to choose a topic that concerns Finnish-Russian conn
inspiration for the research question were comments of Finnish businessmen on p
arise when Finnish companies wish to start operating in the Russian market. Russ
traditionally been a business partner for Finland so it is without a doubt necessary
intercultural relations between companies. Although there have been many succes
embrace this subject they did not overview all aspects of business activities. Besid
changes in world economy and their influence on all countries and almost all indu
assumption that conditions influencing companies‟ performance needed to be revi
the fact that many Finnish companies operate in the Russian market for a long tim
construction related firms, there is no comprehensive literature available on macr
factors, competition or entry modes for these firms. This research is an attempt to
necessary pieces of information in order to put together a picture of what is to exp
consider when entering the Russian market.
With formulation of the research question “What are the factors influencing perfor
company entering the Russian market?” it was easy to choose conceptual framewo
market research approach, Porter‟s five forces and international entry modes theo
collection was based on this framework and mainly consisted of qualitative method
observation and interviews, and also supported by quantitative data. Interviews w
in a manner that allowed acquisition of most amount of valuable information from
Theoretical background was based on proven theories; meanwhile quantitative da
character was mainly extracted from articles of reliable organizations and periodi
necessary for keeping the research information as much up to date and reliable as
it could be used practically by the commissioning party. Reviews of such topics as
political, social and technological situations in Russia were included in this paper
data on direct rivalry, suppliers, substitutes, buyers and possible new entries. The
that a Finnish company can face in the Russian market, such as political, cultural
were also described in this paper. For even more practical use information on som

2
concerning registration of companies, taxation and customs follows the environme
However, law regulations are not the main topic of this paper so they are not scru
Information analysis has lead to pretty much expected conclusions and some recom
However, these results cannot be generalized due to the specifics of the industry,
changing global economic conditions and rather small sample of interviewees. Ma
the research was successfully fulfilled as the research question was answered and
information gathering, structuring and analyzing was build logically and in a corre
1.1 Aim of the study
The aim of this study is to perform a research of macro-environment and competit
influence the entrant-company‟s performance in the Russian market. This goal is a
using conceptual frameworks of market research, Porter‟s five forces and interna
strategies, and analyzing empirical data on their basis. The main research questio
the factors influencing performance of a company entering the Russian market?” S
are the following:
1. What macro-environmental and competition forces have the greatest influen
2. What entry strategy is appropriate considering these forces?
1.2 Contents of the report
First chapter of this report, introduction, is devoted to overall description of work
during this research process. It tells about the background of the research questio
study. After that, a short piece of information is given on a commissioning party, F
Chapter2 describesmethodologicalapproach,i.e. groundsfor choiceof qualitativeand
quantitative methods, data collection methods and issues that arose during this pr
Chapter 3 contains empirical information on current situation in Russia, such as G
rates, unemployment etc. The scope is then being narrowed to recent changes and
window units and door production industry, as well as Self Regulating Orga
regulatory organ created by most recent initiative. Ending this chapter are
Finnish companies in the Russian market.

3
Chapter 4 opens the theoretical part of this paper by introducing concepts of mark
such as macro-environment and competitive forces approach by Michael Porter. T
tells general facts about such macro economic factors as economic, political, techn
social ones. Porter‟s five forces approach is being described later in the chapter d
chapters according to number of forces; direct rivalry, buyers, suppliers, su
entries. Closing part of this chapter is devoted to most common risks during the e
such as political, cultural and currency risk. Milestones of strategic development f
are outlined in Chapter 5, which contains the following parts: the mission and obje
of entrymodeand monitoring.Next Chapter6 revealssomeempiricaldataon current
competitive situation in Russia as well as tips on information sources that a comm
could use. Its structure is based on earlier described Porter‟s model and general r
Chapter number 7 on legislation issues, overviews regulations on visas and
foreign employees in the RF, including lists of some necessary papers. Besides tha
tells about taxation and customs procedures legislation and some latest news abou
contains the results of the research process; the analysis method, primary findings
research question and secondary findings. Finally, Chapter 8 draws the conclusion
research as well author‟s personal comments.
1.3 Commissioning party
Fenestra Oy is one of the leading high-quality window and door solutions service p
Finland and a major player in the Nordic countries. It was first registered at the N
Patens and Registration in 1917. Fenestra Oy produces annually more than 300,00
and approximately 400,000 doors. The turnover of Fenestra Oy is approximately M
the number of personnel is around 800 people.
Fenestra‟s business operation is divided into six different sectors: construction co
rise renovation, house building factories, retailers, agents and export. Fenestra‟s
situates in Vantaa, Finland, but the company's production plants are located in Fo
assembly), window component production in Kuopio, production of exterior doors
production of interior and special purpose doors in Alavus and production of door

4
Posio. Fenestra also has sales offices in Tampere, Turku, Kouvola, Jyväskylä and O
also includes Fenestra Oy‟s so far only foreign subsidiary, Fenestra AS in Estonia
window factory in Tallinn.
Vision of the company for the year 2012 is to be the most desirable partner as a w
producer. Fenestra‟s values are customers‟ satisfaction, productivity, continuous
integrity and cooperation. Fenestra is a customer oriented company that promotes
delivery and zero error tolerance (Fenestra Ltd Company presentation 2010).

5
2 Methodology
Theory should proceed data observation in order to know what to pay attention to
framework helps seeing the gaps in the information, the missing answers and thus
the research problem (Ghauri & Grønhang 2005, 16). It is argued that this approa
adequate with quantitative research, but at the same time it is believed that it is a
to rely purely on qualitative or quantitative method in polytechnic research as bot
methods must be used at different levels of a research. At the very beginning of th
qualitative research was chosen as the most appropriate method because the purp
research is to find the case corresponding with conceptual framework; not to expl
of some event. Here it means that conceptual basis built up by macro environment
forces and international entry strategy theories is being used throughout the resea
framework. Data collection and data analysis rely on this framework as well.
Qualitative approach allows a better understanding of the conditions in which mar
must be implemented, gives insights on phenomenon, which allows the constructio
explanations. It also gives opportunity to embrace many sources of information on
and changing market factors by collecting data from actual sources and real-life c
same time analyze these data. Besides, qualitative method has a more dramatic ap
reader because it concerns real phenomena and experience without binding borde
quantitative method. But in the course of data collection, application of quantitativ
proved to be necessary as well as great deal of information concerning economic m
environment can be represented only in numbers and percentages, e.g. in Chapter
Quantitative and qualitative methods are thus both used in order to perform this r
Research approach is descriptive because both exploratory and causal have no gro
there is no search for the general explanation of the problem as well as no depend
assess. First, general moments of the market are being described according
framework of macro analysis. After that the research proceeds with thoroug
theories and successive presentation of empirical data. Preference in this pa
qualitative approach, and data collection method traditionally associated with
and interviews (Ghauri & Grønhang 2005, 109). Collection of empirical data is don
reading and analyzing articles, official reports and documents as well as following

6
observation. Interviews with field experts are used to reflect on the theoretical fra
points.Two of the interviewsweree-mailinterviewsas it was moreconvenientfor the
respondents,but constantcontactwas maintainedin orderto avoidmisunderstandingor
misinterpretation of the written questions. It was done for making the interviewin
to a real face-to-face one. Interviews were semi-structured; the questions were str
but no optional answers given because it allowed the respondent give more inform
subject, express own opinion. According to McQuarrie
…judgment samples are generally adequate for purposes of qualitative research, as lon
reason to believe that judgment is available. (McQuarrie 2006, 103)
This manner of interviewing is justified here because: a) personal attitudes of resp
value as far as they work in the researched environment daily in high positions an
of interviews is rather modest, so in-depth approach is justified and there i
informationoverloador data structuring/classifyingissues.Besidesthat,respondentsare
representatives of different fields and they were given different lists of questions
their expertise and not make them answer the questions they are not comp
Interviewees were: Aleksej Leppänen, Senior Consultant at Finpro Oy (respo
Rissanen, Vice President of YIT Moskovia (respondent B) and Petri Kekki, la
Russian Chamber of Commerce (respondent C). There were no difficulties in
interviews. During the face-to-face interview with respondent A some questio
explained in a more detailed manner which is a usual case when interviewer and r
personally and have opportunity for questions‟ and answers‟ alteration. Two
performed by e-mail, were flawless and the written responses were received on ag

7
3 Current situation in Russia
Market research framework gives clues on how to look at the situation in a given c
what to pay attention to. The aim of this research is to overview the market and in
conditions that dominate business environment in Russia in order for the commiss
develop realistic strategy. To do this it is logical to start with macro economic fact
precisely with numbers crunching. Empirical data in this chapter are meant to dem
situation in nowadays Russia, meanwhile theoretical analysis of macro economic c
be overviewed in the following chapter.
Currently there are 141.9 million people living in the Russian Federation (RF). Ov
live in the cities. Most of them work in public and manufacture sectors. In 2009 ar
million people were registered at the Unemployment Office, i.e. 8.9% of active pop
however, actual numbers of the Russian Federal State Statistics Service (RFSSS15.01.20101) show
that there were more than 6.1 million able men and women who had no job at the
2010. Most of the unemployed are of 15-19 years old, living in urban areas of Cen
Privolzhskij and Siberian regions. The unemployment rate growth has reached its
February 2009; it was the worst for the last 5 years and drew up 9.5% of able-bod
According to seasonal factors, unemployment rate always goes a little bit down in
summer time, so it did that year too. Partial unemployment was also high by the e
around 1.6 million people were in an unpaid leave or working reduced hours all ov
According to the RFSSS (13.08.2009) average monthly wage in Russia by the end
around 18 000 rubles (400€), which is around 3.6% less than ten months ago, but
varies greatly throughout the country regions. For example, in Moscow area it rea
rubles (822€) and somewhere in Kalmykia and Ingushetia it could be as little as 5
(111€)2. Wages also vary greatly from industry to industry; financial sector employe
better conditions than state ones such as teachers, collective farmers or social and
workers. By the end of 2009 federal and company salaries debts together constitu
MRUB which means that nearly 0.3% ml people in the RF did not get their salarie
and/or in full scale.
1 Федеральная Служба Государственной Статистики
2 Note that these are not the lowest salaries, but average ones.

8
3.1 Main macroeconomic facts
Figure 1. Change in GDP growth, inflation and real salary during Putin‟s presiden
(RFSSS 2010)
As Figure 1. shows president Putin‟s governance was marked with growth in Russ
especially in the later years of his rule. But the past few years have become challe
due to the global economic crisis. Since 2008 inflation rate in Russia was greatly i
global credit crunch. During the first quarter of 2009 rapid rise in consumer price
depreciation of national currency were very noticeable. Second quarter of 2009 w
by a slowdown in pace of fall of consumer activity (still 8.1% rate from the beginni
and at the same time in currency depreciation. Pursuing strong ruble and commer
the country, the Central Bank has decreased its interest rates for 3.5% for organiz
banks, but not for the short-time individual credits. In 2010 many analysts predict
inflation rate growth slowdown as well as continuing consumer price rise.
0,00 %
5,00 %
10,00 %
15,00 %
20,00 %
25,00 %
2000 2001 2002 2003 2004 2005 2006 2007
GDP growth
Inflation
Real salary growth

9
Table 1. Main economic facts about Russia 2009 (CIA database)
Table 1. demonstrates that GDP growth was negative in the year 2009 and amoun
minus 7.9%, however, this result was better than predicted by analysts. The declin
due to cut in process industries production, and the positive effect was made by ag
mining and trade. Starting from June 2009 positive dynamics in GDP growth could
though slow, but still drawing up to 0.3% monthly. Federal budget deficit in Janua
2009, according to the Ministry of Finance, was 1 506 billion rubles, which is 4.7%
Slump in the process industries production and salaries level has led to lower cons
which in its turn resulted in slowing down the inflation rate during the last few mo
Because of the low demand, producers have to reduce their prices for many produ
of course, has two sides: on the one hand it slows down the inflation rate, on the o
even less salary levels and poorer demand. Overall yearly inflation rate for 2009 w
of the main positive contributions to situation improvement was the rise in oil pric
result strengthening of ruble.
Concerning other changes that might influence construction related sector and for
needed to note that prices for truck transportation have fallen for 0.9% from Janua
September 2009; meanwhile railway transportation prices have risen for 10.9% du
period. According to the Central Bank annual report 2009, same period was chara
in the prices of building material producers by 0.2% opposite to the dramatic rise
2008, when the prices rocketed 15.8%.
Currency Ruble (Rub)
Exchange rate Floating, around 30 Rub / US dollar (Central Bank20.01.2010)
Exchange reserves $439 034
GDP $2.117 trillion
GDP per Capita $15,200
GDP Growth YOY -7.9%
Unemployment 8.9%
Inflation 11.9%
Inflation growth 11.8%

10
In February 2010 Ministry of Economic Development of the Russian Federation (M
announced that by that time there has been a GDP and manufacture growth in two
quarters as well as a slight rise in consumer confidence, except in Moscow and few
This demonstrates, according to vice-president of the MEDRF, Andrey Klepach, th
Russia is coming to an end. Big hopes are pined on Russian banking activity. In 20
well as some private banks have acquired shares of Latvian Parex Banka, Beloruss
(93%) and willing to take part in auction of Turkish Garanti bank (21%). Buying fo
shares is kind of a trend at the moment, although experts believe it is not going to
This trend can be sadly but truly explained by the fact that Russian banks are not
their native companies as they do not find them financially stable enough. In this a
companies can go further than in acquiring, for example, industrial companies due
reasons, so they are expected to bring some profit to the country at the end of the
10.03.10).
3.2 Trends and difficulties of the industry
In 2008 around 8.1% of working population of the RF was engaged in construction
in real estate and 17.7% in retail sales and service sector (RFSSS 2009). Construc
balance demonstrates that 5.3 ml m2 of residential area were produced in Russia in Octobe
which is 9.8% less than in October 2008. Investments in the sector amount 366.2
January till October 2009. The Builders‟ Association of Russia (BAR) claims that th
enough and that around 70-80% of domestic construction companies were on the
bankruptcy and in great need of heavy investment.
During the third quarter of 2009 pace of decrease in manufacturing and building s
slowed down. Comparing to 2008 volume of production in these areas has fallen fo
According to President of the BAR, Nikolai Koshman(Press Conference 22.12.2009), no other
area of Russian economy has suffered as much from the world credit crisis as cons
where all the financing is based on credit. As far as demand for real estate and bu
has fallen down, banks stopped giving out the credits for building in same scales a
conditions as before, which had led to decrease in construction. Basically, building
regions all over the Russian Federation reflect the work that continues from the p
i.e. more that 50 % of all ongoing projects have not been started in the year 2009.

11
that there is no proper base for construction work in 2010. In addition to this the c
will still continue to recover, and it will affect almost all building related companie
small amount of them are directly financed from the government budget (those th
Priority National Projects only).
Comparing prices for building materials from December 2008 and November 2009
minus 8.5% change. However, the BAR experts claim that there will be no further
prices; on the contrary, there might be even a slight growth for certain materials,
cement.
Along the heavy construction sector, sector of windows and doors production and
some changes. As can be seen form Table 2., according to O.K.N.A. Media Group,2
of a plastic window in Moscow has grown for around 3% during the period Januar
which equals to almost 5 000 rubbles. All over other regions of Russia this growth
dramatic and constituted around 2.6%. Experts believe that this change in price w
influenced by increase in float-glass prices and polyvinyl chloride (PVC) frames3 for around 5%.
Table 2. Window unit price fluctuation July – December 2009 across the RF (O.K.N
group marketing department)
Price per item in rubles
Growth rate % in
rubles
Approximate price per
item in €4
December 3 869 -1.3 88.26
November 3 921 1.6 90.93
October 3 858 3.5 88.4
September 3 728 -2.9 83.12
August 3 841 -3.1 85.18
July 3 962 -0.2 89.33
Table 2. demonstrates price fluctuations for window units from July to December 2
not very stable, but at the same time, difference in prices never became too drama
3 PVC became more expensive because of the rising oil prices
4 Average prices in Euros are calculated from the average Euro against ruble rate by the Central Ba
rubles

12
period. This table embraces all of the segments of the window market including 80
windows, 11% aluminum constructions and 9% of wooden windows.
From 2005 till 2008 there has been a drastic increase in double-glass panes purch
installed in newly built houses as well as in old "Khrushchev buildings". Firstly thi
increase in personal income of the Russians before 2008; secondly, prices for plas
went down as supply still grew at a faster pace than demand. Considering Russian
becomes very clear why people want better isolation for their apartments. The gre
increase was in 2006; it has grown for 47% from 2005. However, situation has cha
when market growth drew -33% due to global recession. Experts are not yet sure
prognosis for aluminum or wooden panes but they expect PVC pane units‟ demand
for around 5% in 2010 mostly due to prices on oil and also other economic and po
(O.K.N.A. Media Group 10.2009).
Lately there has been a strong tendency of regional companies coming into centra
trend is partially explained by necessity; around one third of regional PVC-speciali
were at the verge of bankruptcy in 2009. Economic efficiency of the business in th
went down for 8-10%, and still newcomers from the regions, e.g. Saratov, make pr
the prices even lower. This is a limited measure of course; it is possible only at the
non-customizing and cheaper accessories. The core price is still dictated by the cu
far as most of the profiles come from abroad. Some experts claim that most of the
middle size firms will disappear as the consequence of the crisis, as well as those
were not reinvesting their capital and focused on the current cash flow only.
When it comes to demand and customer taste without a doubt the most popular w
for the middle class is so-called triple one, with two static panels on both sides and
be opened in the middle. It is the cheapest version and the most heavily advertised
it could be bought for around 50 US dollars, which is still a huge sum for many. U
those people that dared to buy such products from unchecked retailers ended up w
complains and sometimes even physical damages due to improper condition of the
(OknaInfo 14.12.2009). But every bad story has its good side; it is now getting mo
popular to buy quality windows, even when counting every coin. Companies from the EU,
especiallyfrom Germany, Finland and Austria have gained respect and good reputati

13
plastic and wooden doors and windows as can be concluded from advertising cam
retailers that always stress the European origin of their products.
3.3 SROs
One of the most recent trends in Russian business that cannot be unnoticed is dev
so-called Self -Regulating Organizations (SRO). This system is basically the same a
integrated in most EU countries decades ago. SROs are made up by professionals,
into noncommercial regulating organs in order to license and control the work of c
entrepreneurs in one given area, e.g. construction. This became possible because
professional assessment and meaningful formulation of rules and regulations in so
intensive areas was growing bigger with the market development; government int
things slow going and frequently meaningless. It is now more than 50 SROs opera
and construction sector; 19 of them are in Moscow and St Petersburg. In July 201
to unite SROs into national sectors, but despite this change their mission will rema
licensing and controlling the quality. Presumably, any company that wishes to ope
Russian market will have to get a license from one of the SROs at some point.
Starting from 1 January 2010 all previous building licenses were announced invali
company that was not a member of SRO could not operate legally. Some regions o
late to organize their own SROs, e.g. Karelia. For that reason all the companies ha
registered in Moscow or St Petersburg organizations. In January there are still no
which puts some companies under state pressure to obey „alien‟ governance or st
In order to enter the SRO of builders a company must be listed in the Integrated S
Person Register (ISLPR) and supply SRO with:
- certificate of the state granted registration number;
- taxpayer‟s identification number;
- a company‟s charter;
- constituent agreement;
- extract from the (ISLPR) not older than 1 month;
- report of the director general appointment;
- notice of the statistical codes assignment;

14
- professional certificates of the board of directors and engineers;
- papers confirming possession of necessary equipment;
- bank information and list of offered services.
All the papers must be either originals or notarized duplicates, each in two copies
there is single time, monthly and annual payments. The first is compensation fund
which is 300 000 RUB, entry payment of 30 000 RUB, and payment for the docum
package and necessary consultation during the entrance process, which constitute
50 000 RUB depending on the amount of service units offered by a company. Mon
membership fee is 8 000 RUB, and annual liability insurance payment draws 50 00
of registration consists of five stages and lasts from 26 to 62 days (www.all-sro.ru
3.4 Finnish business in the Russian market
In the beginning of 2000 Russia was the major export market for Finnish compani
to the Finnish-Russian Chamber of Commerce (FRCC) it is not though known wha
of export sales actually stays in the country and what is a so-called re-export. How
small and middle -size Finnish companies entrance into the Russian market is seen
important and at the same time, natural step; for many, Russian and Baltic States
becoming something like a domestic market. Prices of products in Russia are dom
prices, which strongly dictates currency rate and consumer confidence level, and
recent credit crisis, but experts believe that even despite this, pace of Russian-Fin
likely to decline drastically.
In 2008 main group of imported goods from Finland to Russia were cars and mach
sum of exported goods drew 7 618 MEUR (Statistics Finland 14.03.2010). The sec
group is food and cattle. To some extend this fact can be explained by the trust tha
customers have towards Finnish products. This is an example of so-called competi
of the country, which should not be confused with competitive advantage of a com
certain level of cost reduction prospective some companies try to move their manu
Russia for more efficiency. Erja Laakso, an international business consultant in the
pointed that during the past couple of years focus of consulting has shifted from tr
export to entering the Russian market as a full-fledged member (FRCC Annual Rep

15
4 Concepts of market research
Company‟s successful performance in domestic or foreign market requires a relia
strategy. Management action should be systematical, based on proved data and an
research (Ghauri & Grønhang 2005, 11). If the end goal of good management is cr
maintaining mutually satisfying and gratifying business relationships, strategic ma
deal with more narrow scope of actions and objectives; it is about exploring the ch
business environment and competition, making a plan for the company to adapt an
realizing and evaluating it. In cases of both domestic and foreign operations strate
for middle-size or large companies and it is important to remember that internatio
should not be a mirror reflection of a domestic one. Normally, large corporations e
new departments that deal with international marketing only; meaning that they i
and wants of the foreign customer, make decisions on products and services that w
differential marketing advantage, analyze most favorable entry modes and develop
companies and distribution chains (Bradley 2002, 13). In theory it means that stra
formulated in accordance with macro-environmental and competition factors of th
For this reason the following conceptual framework was chosen for this research;
environment analysis, Michael Porter‟s five forces model and entry mode strategie
these theories allow a better grasp for market research and describe competitive
would influence a Russian market entrant, and what should be the strategy to follo
succeed in these circumstances. Market research and strategy development are m
and one can follow the other, but normally the research comes first (McQuarrie 20
4.1 Macro environment
Market research can be described as a process of data collection, planning, design
questions and, of course, analyzing results; it is an exploration of the market envir
theoretically is divided into competitive and macro environment (Hague 2003, 1).
necessary to evaluate competition and factors that build it up as well as general co
market that might influence a company‟s performance. Competitive environment,
Porter‟s five forces theory, concerns direct competition, suppliers, buyers, substit
entries.

16
When a company knows its objectives and has chosen the country of entry, it is tim
threats and opportunities of the market, relying on the data collected in the proce
research. Market research is a time and money consuming process. Company has
perform it. First one is to collect all the needed information using own professiona
hire some specialists from outside for this task. Both variants have positive and ne
Using own workers might not always be appropriate because they may lack the kn
foreign market, culture or language and thus require expensive training or simply
terms of their company or department only. Hiring someone has its risks too beca
outsourced marketing expert can be a great specialist in foreign market but he or
be employed already or cost a lot to a new company, and might not integrate fully
company‟s mission and vision. However, both of these two options can give great
approached with care and can be even combined. According to the Senior Consult
is recommended to use help of the established companies; in case of smaller ones
necessary to demand list of sources they used to collect the market information fo
company. This is simply a question of reliability of the data (Leppänen, A. 11.03.20
There are many frameworks developed for exploring macro environments, e.g. PE
DEEPLIST, STEEP etc. With some variations they all include insight on social, eco
technological and political factors. They are sometimes hard to distinguish (Brenn
2008, 74). For example, current position of Russia concerning joining the WTO ca
both economic and political factor, agreements on seas pollution reduction are of
and economic character etc.
Economic situation analysis includes macroeconomic characteristics of the countr
inflation and interest rates, GDP and its growth, currency rate etc. Inflation has tr
seen as one of the main factors for companies working in a competitive environme
the rise in prices and, if wage increase is not at the same level in the country, it m
companies into difficult position of being unable to either raise wages or lower the
Besides the pure money issue it jeopardizes employees‟ commitment and general
the firm. On the other hand, a country with lower level of inflation gets a competit
against the high inflation state. Inflation is directly connected with the exchange r
currency value of the country. The latter can lead to vanishing of the whole range
from the international market due to inability of price based competition; changes

17
rate can literally eat up all the profits. Normally countries that have high level of i
high level of interest rate as well; simply because if the prices rise rapidly so does
paid for using someone else‟s money; a creditor is naturally trying to minimize ow
factor is very important in construction related industries because people rarely b
buy apartments on their own money, they borrow, and if the interest rates are too
will not be able to afford them. High interest rates also discourage company loans
reason, thus investments into R&D or modernization are postponed and reduced a
business suffers from underdevelopment.
Considering the age we live in, age of new technologies, technological environmen
important role in a company‟s life. Of course, not every industry is as influenced b
inventions or their spread as the others, but at certain extend everyone feels the p
authors name it the most dramatic force (Kotler & Armstrong 2008, 209). On one
technological development gives way to new improvements, on the other, it ends t
the old; „video killed the radio star‟ effect. For this reason companies must follow
sharply. Even in such an industry as doors and window units production technolog
happen, slowly though; new plastic materials for frames and components are bein
some cases plastic replaces glass and the whole method of production changes wi
of new, more efficient machinery. These changes have short-term and long-term in
short term a company must adapt fast enough to keep up with the competition or
own research and development programs. However, in future it will most likely m
currently manufactured high-quality products will have a longer life cycle and may
on the slowdown in consumer demand. As technologies become more sophisticate
become more conscious about the products, more regulations are being imposed o
used and production methods, which affect all manufacturers (Kotler & Armstrong
When it comes to political influence it can be extremely strong in some industries,
imply use of large quantities of natural resources or whose main client is the gove
environment is constructed by local, state and supra state (e.g. the EU) authoritie
operations of the company in one or another way. These ways include taxation, em
conditions regulations, competition legislation, fund spending, trade regulations, f
agreements and access to certain assets (Porter 2004, 292). Using these tools poli
contribute into fair and healthy competition. Besides legal aspects, such issues as

18
responsibility and professional ethics have come on stage of political environment
(Kotler & Armstrong 2008, 211). The former is becoming more and more popular
organizations of entrepreneurs with social responsibility emerge in countries with
economies like Germany. Unfortunately, it is sometimes hard to combine good dee
making profit, but generally it can be seen as a promotion tool for a company or e
investment. This trend is very weak in Russia yet. Partly this is due to economic cr
lack of habit of holding social responsibility. But thanks to its rarity every case att
attention. It can be claimed for sure that Russia still remains a country with very s
forces and both direct and indirect influence is definitely affecting every business,
foreign alike.
And, of course, common information on foreign market should not be forgotten; it
physical and geographical features of the country, such as its location, prevailing
weather conditions, natural resource possessions and physical borders with other
social structure. This kind of information is usually available from state databases
reliable web sites as World Bank or CIA for free. Collecting all these data must be
consideration of specifics of the industry and the organization. Information on pur
of a new market can be assessed by investigating foreign companies‟ turnovers an
business history as well as average real income in the country and consumer index
the kind of product a company wants to sell. Population statistics, or social factor,
as data on age and sex distribution, population growth, education level, mortality
well as population density in cities that dictates trends for the construction indust
new houses and apartments will get into use and furnished, how much people are
their wants, how much they actually earn. Last but not least, environmental factor
play its role finally in Russia too as it starts following the world standards on pollu
recycling (Ministry of Natural Resources and Ecology of the RF 03.2010).
In order to evaluate which of the macro-environmental factors plays greater which
own specific business it is good to develop an evaluation scheme. Each of the facto
assessed on a scale from 1 to say 5, or 10 from the position of likelihood, impact o
urgency and then sum of these points. The higher the number is, the most obvious
that this or that factor will play a major role and consequential management decis
taken in order to deal with it. From all the collected data most important pieces w

19
SWOT analyses dimensions. In SWOT analysis strengths (S) and weakness (W) can
two ends of one dimension. They both include factors or characteristics of the com
relevant to its main competitors; they are determined through the firm‟s assets an
analysis. Example of strength could be strong brand, developed distribution chann
reserve; meanwhile weakness can be present in form of undeveloped communicat
poorly educated personnel or weak market position. Opportunities (O) and threats
another dimension. These two are based on analysis of a company‟s business envi
factors that are not under its control. Opportunities normally come in form of incr
rates among population, opening of new markets or expansion of existing ones. Th
usually unfavorable legislative or political interference, interest rates growth, new
SWOT analysis should be brief, sharp and timely. To begin with a resource-based
management points the angle at which to look at company‟s possessions; all inter
the company are seen as a basis of competitive advantage; the source must be app
sustainable, preferably durable and unique (Brennan & Baines 2008.99). In case o
company this could be a management network, distribution chains or access to ba
information resources unavailable to its Russian rivals.
4.2 Porter’s five forces
Macro environment creates conditions at some extend similar to all industries in a
To evaluate competition one must look into the industry, which can be described a
…group of firms producing products that are close substitutes to each other. (
Grønhang 2005, 38)
According to Porter‟s five forces framework, a business does not exist in the envir
direct rivalry only, but also in conditions created by suppliers, buyers, substitutes
or so-called extended rivalry (Porter 2004, 6). Every starting business has to inves
have reasonable returns; competitive forces described by Porter and degree of the
determines levels of investments and returns in an industry. Main idea of the five
framework is to show that every business exists in environment that includes far m
than direct rivals only. A company must find its position in this system in order to
threats, set the pricing and evaluate own prospective profit and loss.

20
Figure 2. Porter‟s five forces model including entry barriers for new entrants
Figure 2. demonstrates relationships between the company and its competitive en
according to Michael Porter‟s vision. These forces; direct rivalry, bargaining powe
and buyers, threats of new entries and substitution, determine the degree of comp
given industry, which in its turn influences the choice of competition strategy and
investments into industry. All the forces are overviewed in the following chapters.
4.2.1 Direct rivalry
Direct rivalry is a competition that comes from other companies operating in the s
selling similar goods. It can sometimes be problematic to specify who are the dire
due to smaller or bigger differences in sorts of production or target groups. It can
quality or prices that put the rival away from your league. However, price compet
to Porter, is not likely to last for long and rivals are normally able to catch up with
leader (2004, 17).When competitive companies are known it is time to evaluate th
and marketing strategy. Common strategy among several companies leads to mor
competition, especially in case when a firm has very few or single line of productio
factors that increase competition are high level of investments and thus unwillingn
to share market returns; sometimes returns are not seen as money income only bu
Company ASuppliers
Direct rivalry Substitution
Buyers
New entrants
Entry barriers:
Economies of Scale Product Differentiation Government Policy
Capital Requirements Customer Switching CostsAccess to Distribution Channels

21
position and overall reputation of a firm. Slow growth in a given industry does not
competition either; in mature industries there can be very little resources left for f
development and expansion sometimes leading to a struggle for them. Industries w
number of players and/or lack of differentiation are as well characterized by volati
there is no monopoly or oligopoly situation, consumers win but it puts companies i
when they are forced to fight for their client with all means possible. Another suffi
determinant in the degree of rivalry is the following exit barriers: a) specialized as
liquidity value; b) fixed costs considered by labor contracts and others; c) interrela
between company units that influence company‟s reputation and common assets;
barriers, such as management aspirations, loyalty or other non-profit related reaso
and social restrictions that do not allow easy exit due to the following consequenc
the community (Porter 2004, 21).
According to Brennan and Baines, rivalry can be even tougher between domestic a
international companies. This fact is easy to explain; international companies can
greater extend at the expense of another country‟s market; meanwhile home-base
such compensation or back-up markets (2008, 66). In his Competitive Strategy bo
Porter claims that international companies can bring some diversity to the existing
competitive environment as they might have other views on things, other understa
situation and other circumstances to deal with (2004, 18). With or without interna
interference, factors influencing rivalry change constantly; when industry matures
revolutionary technologies are been developed or state regulations, amended pictu
competition changes with them.
4.2.2 Bargaining power of buyers
In case of a manufacturer its buyers are normally not the individual customers; mo
they are companies or retailers. However, they possess the same buying power ov
companies, i.e. they create demand, only with different accents. The main differen
individual consumers and retailers is that the latter can influence the choice of the
promotion and advertising campaigns. Buyers influence prices and profitability lev
or lesser extend according to the following factors. The fewer buyers there are, th
they have (Brennan & Baines 2008, 68). If purchasing power is in hands of basical

22
clients they can dictate their conditions to the seller with more effect than if the se
multiple buyers. If buyers have to spend a large portion of their available resource
or if the products are not clearly differentiated and their quality is not important,
buyers will choose the least expensive option and cause price competition. Low sw
also allow the buyer move freely between sellers, so if terms of one seller do not s
anymore the latter can simply go away with no losses. This is normally the case in
and low binding relationships. Another threat that may come from buyers is a cha
retailers but not individuals; possibility of a backward integration by retailer puts
into position of offering more favorable terms on demand or face the buyer enterin
manufacturing industry and becoming a direct rival. Besides that, backward integ
the existing distribution chain. Nowadays distributors and retailers are a necessar
any distribution chain; they provide cost-efficiency or on the contrary, can be ineff
2003, 53). However, for becoming a credible threat a retailer must possess necess
and know-how. This knowledge also gives a buyer an advantage of comparing pric
competitors, production costs etc. and thus demand better terms (Porter 2004, 26
4.2.3 Suppliers
Suppliers provide materials necessary for a company‟s production. The degree of
depends on few factors that basically can be seen as a reflection of the buyers‟ po
(Porter 2004, 27). First is the structure of the industry; if there is a monopolistic b
will hardly dictate its will to the only customer. If, on the contrary, suppliers are h
clients are many it is more likely that buyers will become dependent. Another thre
suppliers is so-called forward integration, which can be seen as a phenomenon qu
backward integration because it reflects expansion to other realm; in case of supp
happens in direction of establishing own retail chain and becoming a direct rival.
especially likely to take place in industries where it is more cost-effective to have o
chain and when reorganization is easy and relatively inexpensive. Suppliers‟ powe
become more feasible if there is no need for them to compete with substitutes due
insignificance or if supplier‟s product differentiation and switching costs are high
put supplier in a superior position and leave buyers with less choice. However, if a
important for the supplier or does not see supplier‟s products as very important, t
power changes; in this case retailer can win the opportunity to demand certain qu

23
4.2.4 Substitutes
As it was pointed earlier, according to Porter‟s five forces approach competition e
given industry. Substitution in an industry refers to products or services that shar
characteristics. Most illustrative example is probably threat of synthetic materials
components when possible due to higher price of the latter. Determining a substit
product can be a hard task because it is difficult to evaluate the degree of similari
response and credibility of threat. Twenty years ago no one saw the Internet as a p
substitute for printed periodicals or even books. Threat from substitutions is espec
industries connected with advanced technologies. The pace of development can pr
substitute in a manner of months. Normally, core competitive advantage of new su
their price because of lower production costs, less labor or capital intensive produ
end of the day it is a price-quality combination that makes a substitution a serious
competitor (Porter 2004, 24).
4.2.5 New entries
Threat of new entries comes from the companies that do not yet compete directly
so by introducing new line of production, refocusing on new target group, merging
manufacturer. Main factor defining the level of threat from newcomers is the indu
barriers (Brennan & Baines 2008, 66). Entry barriers can prevent a firm from ente
it into competitive disadvantage; on the other hand, this normally works well for e
companies as their returns increase with fewer entrants. Sometimes these obstacl
naturally, e.g. by high cost of raw materials; sometimes operating companies cont
reinforcement (Hitt & Ireland 2009, 49). Porter names six main entry barriers: eco
product differentiation, capital requirements, switching costs, access to distributio
disadvantages independent on scale and government policy (2004, 7). First one, e
scale concerns costs of a unit production and the absolute volume of production. M
a newcomer in this case is that the entrance has to be made at large scale or, if in
scale, at cost of losing the cost advantage. Any of these two puts a business at risk
is product differentiation. It occurs when there is a clear leader in the industry or
with very loyal clientele. Overcoming this barrier takes a lot of time on building th
brand/company identity in the eyes of potential buyers and a lot of money on prom

24
advertising. Third barrier arises from need for heavy investments and for that rea
capital requirements. A company entering new industry might have to acquire cos
factories or warehouses, machinery and equipment as well as run development pr
start-up losses. Switching costs barrier refers to costs connected with switching fr
to another, e.g. personnel retraining or equipment modernization. Basically this b
challenge of adjusting to a new source in a most appropriate way. Fourth barrier,
distribution channels refers to a struggle for a position in an existing distribution c
attracting the partners, or for creating a new channel. This barrier is normally hea
by existing companies, especially in case of long-term exclusive agreements betwe
in raw materials processing or aircraft manufacturing. Fifth barrier, cost disadvan
independent of scale, comes from existing companies that have gained cost advan
other than economies of scale source. Pretty much everything can become this sou
on the country, industry, requirements of production and sometimes just luck. How
sources named by Porter lie in areas of technological advancement, raw material a
locations and developing skills of personnel in labor intensive industries (2004, 11
characteristic of the source of cost advantage should be its unavailability to the co
new entrants. And finally, last barrier is policy of government which can close acc
industries or limit it strictly. Influence of the state policies and risks that a compan
relation are overviewed more in detail in the following Political Risk Chapter. In o
real risks considering entry barriers it is advised to determine the entry deterring
described by Michael Porter as
The prevailing structure of prices… which just balances the potential rewards
entry… with the expected costs of overcoming structural barriers and risking
(Porter 2004, 14)
Calculating the deterring price assists in decision-making process and may even d
entry attempt in given circumstances will not be successful or justified.
4.3 Risks of the new market entry
It is argued that mostly companies go abroad not for the cheap labor or raw mater
mostly for fewer risks (Brennan & Baines 2008, 216). Whether that is true or not i
RF, before investing into any kind of activity in a foreign market, it is vital to asses

25
order to decide whether it is worth getting into it and to develop the mechanisms
traps and dead-ends. These evaluations must be based on market analysis as they
choice and development of an entry strategy and risk management.
In order to protect oneself from political, currency and other risks at least at some
company must develop a risk management strategy. There are a number of insura
that deal with different uncertainties and can offer their service. Of course, compa
country, partner status and stakeholders‟ network play big role. The insurance co
determine the area of their interest as well as price when they assess the readines
company for the given market (Bradley 2002, 131).
4.3.1 Political risk
Political risk is any risk that is associated with politics, as can be seen from the na
protect one‟s company from political risks it is necessary to evaluate the level of p
foreign assets, efficiency of legal system as well as level of corruption and overall
interference.
Western business tradition very often sees government influence as interference.
when state plays the negative role by setting price controls for foreign companies,
quotas and tariffs, heavy taxation, slowing down the process of giving licenses and
interfering with the currency rates. A market with a high level of state control is n
characteristic of a country with weak currency and high inflation rate. In this case
government promotes kind of a patronizing policy, which is of course illegal, but in
takes place. Protection of manufacturers‟ rights and products‟ authenticity should
account as one of the risk factors because they play important role in yet developi
such as Russian one. Due to underdeveloped juridical system its efficiency can be
corruption and dependency on the government.
Another political risk is nationalization of a firm‟s property. This is now rarely the
developed countries but still can take place. Nationalization is a method of transfe
own possessions to the state for compensation. Normally, nationalization takes pla

26
cannot fulfill its obligations towards its workers, or has a debt that puts it on the v
bankruptcy (Connor & Milford 2008, 37).
Unwanted intervention from the officials can also come in other forms.
“Corruption could include organized crime, politically motivated damage to a
company‟s assets, and the request for bribes from all levels of government, in
juridiciary, the police, politicians, bureaucrats and social services.” (Brennan & Baines
2008, 219)
And finally, the last but the largest scale risk is general political instability due to
current government, wars etc. To companies this simply means potential shift in r
protection of foreign investments and intellectual property into unfavorable dimen
4.3.2 Currency risk
International company has to deal with different currencies and thus puts itself at
arises from movements of currency values against each other. If sales operations p
different currencies, so normally do the revenue and cost calculations, debts and i
returns on investments. Currency risk must be included in market research as a co
within the macro-environmental economic factors. Basically, currency risk is a con
with economic environment framework and can be described as a sudden unfavor
currency rate (Shoup 1998, 5).
Whatever currency risks are, they are to be taken into account. Risk management
with two types of currency risk; systematic, e.g. interest rate risk, inflation risk an
influence all sorts of investments; and unsystematic, which mainly strike the indus
business. Needless to say, that in Russia both types of risks exist and demand effe
management strategy. Risk management team has five main tasks to accomplish.
recognize the risks, determine its type or types. Secondly, measurement methodol
developed, i.e. the management must know at which extend which amount of curr
This task intersects with the third one which is measuring the exposure of each cu

27
a given country; here concrete numbers must be calculated already. And final two
of risk management strategy and hedge execution (Shoup 1998, 12).
4.3.3 Cultural diversity risk
Concept of cultural risk can be seen as a part of social environment framework. Bu
Russia is still very often seen as business in terra incognita. Problems arising from
diversity had led to many companies‟ operation interruption in Russia on one hand
they became the stimulus for exploring and studying the ways of international com
With a little bit of patience and mind openness any cooperation can be successful.
foreigner coming to and working in Russia faces cultural shocks; some because th
business culture of European Russia does not differ a lot from European and find t
the wrong, others, because they do not know what to expect at all.
The most obvious difference between Western countries and countries like Russia
communication theorists, is a high context culture of the latter (Moran & Harris 2
Basically this means that if something is not said it does not mean that it is not me
and taken in consideration. For a foreigner it might seem a little awkward that he
expected to understand the blink of an eye or facial expression as „yes‟ or „no‟ or
of course, a simplified example but the point is that non-verbal and intuitive comm
vital for those who want to build long-lasting relationships with Russian partners.
entrepreneur should never try to talk business immediately; instead he or she sho
necessary small-talk with a Russian partner and thus build the ground for any seri
There are known cases when business lunches have stopped before any business t
just because no proper mood was created and on the bases of few exchanged phra
common business was put out.
Another important aspect is initiation, meaning that any newcomer, whether he or
a working group or starts acting as a business partner, must be accepted by the m
Successful business relations in Russia as in many Eastern countries is impossible
and feeling of „one of ours‟. That is why it is recommended for Finnish representa
common traditions and character similarities of two cultures, not the differences.
commonality will save lot of nerves and at some point even money while working i

28
Concerning this aspect of Russian business culture one should not forget about th
manager of some Russian company says that they want to make friends with a Fin
it does not exclude the possibility that they also want to squeeze some money out
probably the most vivid example of reading between the lines in a high-context cu
Hierarchy still plays important role in daily working life in Russia. Here in Finland
to call your superior, teacher or neighbor‟s parents at their first names. It is most
in Russia as it is in Germany or Japan. Foreign partners must really pay attention
is introduced, because it is always better to remember first name together with fa
Nowadays business etiquette changes rapidly and many Russian business men are
called at their first name or as Gospodin Petrov or Gospozha Petrova, i.e. using „M
a family name. Together with their foreign partners they learn how to pronounce e
difficult names, especially Finnish ones, as it is very topical. But even despite curr
superiority and seniority are highly praised in Russia (Wilson & Donaldson 1996, 5
Misunderstandings are unavoidable in intercultural communication but it is worth
studying each other‟s ways. It is up to a company‟s management to minimize the
risk and consequences of unawareness. Face-to-face and personal contacts are the
proper business communication in Russia. And finally, some basic issues to remem
Russians do not trust the deal which is not sealed with signatures, they do not foll
word to word and they expect understanding and mutual respect as well as other
(Smith & Bond 2006, 40).

29
5 Strategy development
As it remains fair, market research is meant for structuring and guidance of mana
i.e. all the information that a company managed to get on the market, such as pre
Chapter 3, must be used to develop a strategy. Strategic marketing mainly concer
effectiveness of a firm. Aim of a strategy is achievement of a competitive advantag
own assets in given macro and competitive conditions, reinforcing it and keeping i
advantage is normally achieved by one of the main three strategies: cost leadershi
and focus. First one refers to lowering the prices for customers usually by product
reduction. Applying this strategy management must take care of most efficient fac
machinery, all possible cost reductions at expense of e.g. R&D or qualified person
time, cost leadership can provide protection from all competitive forces; economie
an entry barrier, low costs satisfy buyers, greater flexibility in relation to suppliers
with less power and substitutes are normally unlikely to appear.
Differentiation strategy is basically about emphasis on one or several features of t
service other than price; it can be a strong brand, high quality, excellent service o
dealer network. Ideally, differentiation should promote customer loyalty, well abov
returns and thus strengthen a company‟s position against all forces of extended c
finally, focus strategy may embrace one of or both former strategies but stressing
target group, production or market segment. Focus strategy is not aimed at the w
market; its effect can normally be seen within a narrow scope. Whichever strategy
more attractive for a company at a given stage of development it must be justified
corporate and strategic objectives as well as assets and market conditions (Porter
5.1 Determining mission and objectives
As a first step of strategic development a firm‟s management must decide on corp
and mission they will pursue. For example, a company may determine that it is of
importance to differentiate its products from others, to achieve high sales number
itself as a serious player in a new foreign market by gaining a certain market shar
an objective. The mission could be a much broader task; delivery of high quality p
customers, developing the industry, becoming the most wanted partner or other g

30
Objectives must state what the company wishes to achieve in a given period of tim
objectives are normally long-term and marketing ones consider product and certa
are arguments about characteristics of proper objectives; the SMART approach gi
stands for specific, M – measurable, A – attainable, R –realistic and T for timely. M
that objectives must be realistic; otherwise company will find itself in a position of
and unexpected results. In order for the objectives to be real a company must put
context of current market situation, in other words, to perform a „situation review
marketing audit or research, SWOT analyses, competitive forces overview and dev
assumptions (Brennan & Baines 2008, 102).
5.2 Choice of entry mode
Choice of entry mode depends on few variables; objectives of the strategy itself, co
situation and conditions of the country of entry and of the industry. Most common
exporting, strategic alliances and foreign direct investment (FDI). Export can be p
means of sale to foreigners that visit company‟s domestic market, with help of for
or agent and finally via own subsidiary abroad (Bradley 2002, 245). Exporting nor
company necessary experience and offers certain limited degree of involvement. I
to start with exporting for most businesses for the reason of lower risk, lesser invo
greater mobility. At the same time there are some disadvantages in exporting; it c
variety of operations, reduces level of control from the host country, keeps the com
level of supplier only and currency rates influence the level of returns. It is norma
when dealing with similar markets and existing products.
International
market
development
Distant markets Strategic
alliance
Acquisition
(FDI) Acquisition (FDI)
Similar markets Export Strategic
alliance Acquisition (FDI)
Existing markets Strategic alliance
Existing
products
Similar
products New products
New product development
Figure 3. Modes of entering new business, adopted from Bradley, F. 2002

31
Figure 3. demonstrates how two key factors, market and product development, infl
choice of an entry strategy. The further we go from existing conditions the more lo
choose a more complicated entry mode, such as strategic alliance or foreign direc
As it is often considered export can be the first step only in a foreign market, the n
be to choose one, or several combined, of the contractual entry modes or strategic
licensing, technical agreements, franchising, co-production agreements, acquisitio
investment. The very first one, licensing, is basically buying or selling by contract
technology; it offers low-cost knowledge transfer and investment. Current global e
situation makes it a great advantage. Licensing gives a chance of relatively safe en
difficult and rapidly developing markets, such as Russia. It also offers a local partn
guide and additional support. However, costs of adaptation of technologies and co
quite high. Industries recovering from the economic crisis must be carefully exam
costs and rewards. Besides, licensing is always risky from the point of opening up
knowledge and secrets. Sadly but true, fraud takes place often in Russia, so this ri
seriously evaluated. The other side of this issue is „promoting‟ possible perspectiv
Even established partners must be reassessed if the owners or board of directors
new administration might have different views on cooperation.
As can be seen form Figure 3., it is expected that company moves from less risky a
of conquering foreign market to more sophisticated and demanding ones. Licensin
franchising might be enough at some point but it is likely that with further develop
company‟s operations the strategy will change as well. Franchising can be describ
business where one company sells rights on its developed business model to anoth
franchisee, normally within restricted area and time frames. Franchisor is still the
do all the market research and evaluations, but at the same time by franchising it
exercise new opportunities (Spinelli & Rosenberg 2004, 3).
In a highly complex Russian market, a firm might also consider joint venture, or a
strategy. Basically, both seem appropriate for the commissioning party, but if the
securing their product knowledge, reducing the risk of incompetent partner and h
resources the management might prefer the latter option.

32
Foreign acquisition, one of the FDI forms, refers to the acquirement of a foreign c
has necessary assets such as established brands, information or distribution chann
allows instant possession of already made and used advantages and gives immedia
foreign market. This was the way chosen by such giants as UPM-Kymmene. Norm
timing for it is when the currency of the country of entry is rather weak. It is an ex
so only wealthy companies can afford it. It is not only about funds; technical and m
as well as technology transfer will generate costs as well. According to Porter, it is
an acquisition profitable because the company that is being bought is in some kind
already, which means that the buyer will most likely inherit it. The market for com
prices, including the floor price, at which acquisition can be performed, which doe
above-average profit that often. That is why acquisition disappoints managers‟ exp
and that is why the acquirer must be extremely good at operating the acquired bu
2004, 352).
There are two main ways in which acquisition can be done; first one is complete le
when all assets and liabilities are transferred to a new owner, board members cha
management functions and R&D of the two companies are integrated. Second one
time consuming; ownership change allows both companies to exist as separate leg
often leads to decentralized management and complicated structure. It can be stil
profitable and very handy in a way that Finnish and Russian legal systems differ g
companies do not have to deal with legal issues changes that much. The greatest a
foreign acquisition is that it allows experience and information exchange between
cultures, which invests into R&D of the companies at a high degree. Building mate
acquisitions tend to reduce competition as the potential efficiency gains can still b
can gain support from the state. Risks that Finnish acquirer must keep in mind are
diversity, very often unwillingness of local employees to work for a foreigner, misp
the Russian market and high prices of synergy, much higher than for domestic buy
challenges then are; evaluating the acquired firm‟s assets, finding compromise wi
teams and choosing the right moment in time (Bradley 2002, 312).
In case of a smaller budget and wish for choice of location it is recommended to st
venture. Joint venture can be effective from strategic point of view because it mak
separate business organization and thus allows common work with limited liabiliti

33
ventures are widely used in products and service distribution to foreign markets (G
1). Though joint ventures are not burdened with reorganization issues, still all the
procedures and strategic decisions have to be handled with accuracy.
5.3 Monitoring the strategy
Final stages of strategic planning are resource allocation and monitoring. This me
moment budget must be cleared, numbers given for every resource and every seg
operation. All executive persons have to be appointed and detailed plan for the ne
developed. It should include milestones considering which progress evaluation and
analysis of objectives realization will be made. Monitoring is necessary for several
all it demonstrates whether the company stays true to its mission and actually goi
planned direction. Secondly, it highlights the objectives that were set and either r
and at what cost. And thirdly, monitoring gives tips on what and how is in need of
development. It can be an early alarm for some malfunction or even can prove the
being inappropriate. Considering the seriousness and the scale of the issue in que
necessary to change tactics or whole strategy. The latter will of course demonstra
of those in charge of strategic development, but will help avoid trouble for the wh
Monitoring allows not only insight on things going on within a company but on tre
competitive and macro environment. It is up to company‟s analysts to follow the c
society and the industry; this can not only point new issues but also ways to use th
of the day, monitoring should demonstrate whether company‟s performance is in
changes around and within it and whether it satisfies the stakeholders (Hitt & Irel

34
6 Competitive environment in Russia
Research of competitive environment is based on earlier described Porter‟s five fo
Macro-environmental factors are mainly overviewed in Chapter 3 and are not revi
chapter. Empirical data for research were collected via observations and interview
approach is descriptive as was mentioned in Methodology Chapter; the aim is to d
phenomenon of competitive environment in accordance with theoretical framewor
explain it or figure out the dependencies between possible variables. First part of
devoted to direct rivalry as research results stress its importance most. Buyers, su
substitutes and new entries are united under one part because they currently play
direct rivalry in the industry according to the respondents and offer little empirica
6.1 Direct competitors
Companies producing doors and window units on the territory of Russia can be se
rivals for the commissioning party. Their choice and specifications of products ma
greatly. To mention some concrete companies it is worth to demonstrate a table.
Table 3. Top 5 best window service companies by February 2010 (O.K.N.A Media5)
Position Name Domicile
1 Modeline Moscow
2 EuroOkna Moscow
3 Moskovskie okna Moscow
4 Satels Moscow
5 Kaleva Moscow
Table 3. shows top 5 of Russian companies that were named by managers of a 100
working in the same industry. Unfortunately, the turnover numbers are not public
because companies operating in Russia are not obliged to publish their annual rep
normally won‟t do it voluntarily (note that companies mentioned in the table oper
than Moscow region as well, the headquarters of top 5 happened to be located in M
5 Data is based on monthly survey among managers of top 100 companies

35
Besides companies mentioned in the table there are such giants as StroyMaster th
one of the strong competitors because their range of production is about the same
and their reputation goes a long way in Russia. StroyMaster‟s competitive advant
well-established distribution chain.
According to different sources, such as newspapers articles, the leaders of window
producing and selling companies are only estimated. For example, Okna Hobbit (О
is one of the leaders as they fit in top 5 window sellers of the Moscow region. They
window units with help of Italian and German machinery from VEKA profiles. Woo
aluminum window panes are also in their line of production, as well as accessories
firms they offer their own service for installation and maintenance.
EuroOkna (Евроокна) which takes second position in Table 3. is a well-known man
PVC and aluminum doors and window units. They have been on the market for aro
and gained their position in top 3 companies in private sector plastic windows‟ sa
Russia. The company offers production from European materials, stresses its qual
professionalism of all the workers.
And, of course, it is necessary to mention the Simpleks (Симплекс) company, whic
often being named as one of the leaders of window manufacturing; they cooperate
companies like Proplex and Realit, as well as foreign Coulisse, ROTO, Flexi Force,
Reynars. They are famous for producing high-quality standard PVC and aluminum
well as customized windows of unusual colors, shapes and sizes. This might seem
many countries but in Russia it is a good strategy because desire to show off and s
pretty dominant. Gazprom and Lukoil can be named among their clients.
Finnish companies that can be seen as rivals operating in the Russian market are
Oy, which operates in St Petersburg, Moscow and Kazan‟, as well as Velux Russia
operating in the country since 1991 and has gained great reputation. M-Domus op
with domicile in Moscow and works as a subsidiary of Finnish Luontotalo; it offers
wooden houses in the Russian market but also window and door units. Companies
Oy, which specializes on warm and fireproof doors and glass units can hardly be s
competition company. Their line of production differs from Fenestra‟s main opera

36
intersects only partially. When it comes to Russian based companies the rivalry is
window and doors manufacturers can be found in a great number throughout all R
Although many of these companies sell brands by, e.g. Tiivi or Veka, that have the
and licensees in Russian production.
Currently there are 3 564 companies producing plastic doors and window units in
Federation (RF), 264 companies producing wooden window units and 23 producer
aluminum and aluminum-wooden window units. Plastic-glass window panes are pr
companies only, heat-insulating by 47 companies and sound-proof by 40 firms only
companies are concentrated in Central and Privolzhskij areas (O.K.N.A Media Gro
6.2 Extended competition
Buyers and suppliers together with the manufacturer very often constitute a distri
although it is popular among large companies like Proplex to have own distributio
a firm. However, buyers as companies and individuals have changed since the coll
Soviet Union. Unlike in the early 1990‟, when window and doors selling companie
could choose their client, current Russian market is characterized by rather health
when finally quality becomes the decisive factor. Such trends as customer loyalty
were basically unfamiliar to the industry in the RF 30 years ago. In course of yet im
retailers have dropped their prices in order to attract a confused customer. Howev
development law has taken its tall; the prices have reached their bottom finally in
whole sector had shifted to a customer-based model of operation. Despite the hug
retailers all over the country 75% of population of the RF, according to latest rese
08.2009), is still in the need of new window units, so there is a customer to fight fo
guarantees enough work for retailers and thus large amount of retailers all over th
Unfortunately their exact number is not officially estimated.
When it comes to suppliers it is quite obvious that they very often dominate the lev
competition in the industry, especially such a material consuming one as window a
production which demands wood, glass, aluminum, PVC etc. Talk about PVC defic
in Russia long ago. In 2006-2007 it was forecasted by experts that although all pro
full capacity, production would have to be tripled by 2020. In 2008 Russian marke
around 975 000 tons of PVC meanwhile only 579 000 tons of it were produced in R

37
as Sayanhimplast, Kaustik and Plastcard were determined to enlarge their produc
but 2009 was also a year of PVC deficit although demand fell up to 40% comparin
import was not a solution either; prices rise dramatically in that case. China and S
the leading importer positions at the moment. Some producers plan to go further
development. For example, Rusvinil is planning to build a new PVC factory near N
Novgorod, which will manufacture as a licensee of Solvay. This and other factors w
PVC pricing, but at the moment, import material constitute the price at a greater
Table 4. Top suppliers of window and doors components (O.K.N.A. Media Group)
Product Glass Profiles Sealant componentsAccessories
AGC Rehau Proplex TBM
Pilkington Proplex TBM PROMA
Siberian Glass CompanyProfine Rus Robitex Vitrazh
Modern Glass Tatprof Komplectservice DoorHan
Story Master DeceuninckSiberian Glass CompanyOknaComforta
Table 4. demonstrates variety of suppliers of products necessary for window units
construction starting from glass and ending up with accessories. Each group is rep
only five companies named by O.K.N.A. Media Group as top ones; most of them ha
production and sales facilities all over Russia. This fact must be taken into accoun
building up a distribution chain is a top priority for Fenestra. This process include
supplier/suppliers on ground of their product range, proximity, reputation and pri
finding retailers, if Fenestra will not retail within own company. Connecting these
criteria of their choice is the third one – logistics. Transportation companies like A
Transit, Translogist and hundreds of others can offer their service. Every region h
companies, e.g. Karelia Tral, and representatives of such giants as Russkij Transit
or another will depend on the scale of operations and range of cities (RZhD 22.03.
There is another way too – organizing own logistic department. This option often s
favorable mostly due to start up expenses; it is necessary to organize storage facil
trucks and trailers (new or used), hire personnel and save for technical maintenan
it will require routes development, scrutinizing timetables and controlling demurr
forced idle condition of means of transportation) for better efficiency. Agencies lik

38
Logic can be used to assess profitability of own logistic operations and offer ways
rationalization (Foreign Business Support 2005).
In case of window and door production technological development and creating ad
substitute is unlikely. There are innovations in the plastic materials market but the
developed nor spread enough to substitute e.g. PVC. It is hard to imagine a substi
or window in a house; only smaller scale substitutes are possible now, mainly in ac
substitutes cannot be classified as credible threat.
And finally, entry barriers remain rather high in case of mass door and window un
High costs on raw materials, components, factory or other land rent, as well as ec
demand heavy investments. Complicated system of obtaining licenses and permits
barrier in many regions due to bureaucratic procedures. Because of the recent eco
companies tended to leave the industry, move closer to areas of higher buyers‟ ac
On one hand, it has made the industry harder to enter. On the other, as some expe
has left „empty spaces‟ which have to be filled in by new entrants.
6.3 General risks
Russia‟s economy has changed faster than any other economy during the last two
(especially in areas of automobile production, agriculture, import of nuclear waste
this has caused dramatic changes in legislation, taxation, level of government inte
very way business is done in the country. It is clear that any instability, even posit
smooth and predictable enough, can be the reason of concern for foreign investors
entrants. Finland has a long history of dealing with rapid changes in Russia and is
the most cautious and aware partners, which gives Finnish companies advantage
6.3.1 Political risks
Russia is a country with high distance between classes of society; this means grea
likelihood that sudden and even violent political changes can take place. Under Pu
Medvedev‟s government political arena of Russia has become more clear and stag
risks connected with political conditions are still very real for foreign companies. F
foremost, political course influences greatly economic situation of the country and

39
rate. It would be enough to remember severe fluctuations during Yeltsin‟s late rul
many companies to give up their operations and lose their investments. Besides th
rarely been good in keeping good relationships with the neighboring and other cou
regular basis. Incidents in international partnership (e.g. Shell case6), or extradition cases (e.g.
Litvinenko case) and other, all influence the goodwill of foreign investors.
Current government has been heavily criticized by domestic and international med
into dictatorship in many areas of public and business life. Whether that‟s fair or n
deny that state and local interference can have serious effect on any business. Cor
without a doubt one of the greatest barriers for foreign as well as domestic compa
This is mostly heritage from the past; the uncontrolled activities of party members
crime wave of the 90‟s, when every firm had to pay for extra protection to both cr
and the police. It is a widespread opinion that no business in Russia can exist with
some stage of its development, although that is a matter of argue. However, it is h
understand to most of the civilized world, but, unfortunately, that is the way it ver
although current government had made great progress in fighting corruption. Acc
of the Institute of Positive Development (IPD), Jakov Rezgo (Kreml Org Interview 2
great amount of foreign companies leave Russian market because of being incapa
with this darker side of the business. IPD is a state organization which task is to sh
avoiding corruption traps and most common schemes to foreign companies. For ex
very „popular‟ way to pinch from the companies is to arrest the company‟s assets
some fake acquisition for a couple of days. The problem arises when bailiff who ha
arrest is simply nowhere to find. He is looked for for a couple of weeks, meanwhile
assets get sold to another company as a compensation, or the arresting company g
sells out. So by the time the bailiff cancels the arrest finally there is nothing left fo
owner and no one to be found to blame. Unfortunately, bailiffs are named the mos
profession among the officials (Rezgo interview 22.10.2009). Certain police depar
bad reputation for bribes, e.g. Department for Fight against Economic Crimes7.
6 Tensions around the Royal Dutch Shell company case have started during Sakhalin 2 project on ex
oil. Shell has been involved in the Sakhalin project since 1994. After few years of work it was pract
partnership with Gazprom (Connor and Milford 2008, 84). In 2005 Shell was offered a 50% shares
of 25%. Of course Shell‟s investments had to be increased considerably, which they were. Shortly a
2006, Ministry of Nature started a detailed inspection of the Sakhalin Energy, Sakhalin 2 operator,
violations and stopped all the operations (Politics and Economics Journal 21.03.2007). It was highly
political case and resulted in losses for Shell.
7 DEFC -ОБЭП – Отдел по борьбе с экономическими преступлениями

40
Normally, companies entering the market have the risk budget. If the company se
service, risk becomes even greater as these goods can be confiscated or lost. Som
that this kind of risk management can come up to as much as 20% of the whole m
strategy budget. Of course, normally this sum can be smaller and it should not be
but on paying the service of consulting companies which protect them from extra
snare crime schemes or ever-lasting official procedures. It is however strongly rec
use the state service. So-called private protective organizations have to be very tru
otherwise they might get their client even in worse trouble than corrupted official
6.3.2 Currency risk
All currency operations that involve import and export of goods and services as we
must be registered and reported according to the Currency Operations Law (№ 17
10.12.2003). The main purpose of this law is to harmonize rules of currency opera
executive organ is Central Bank (Orlov 2010, 347). Being the main monitory body
Federation, Central Bank controls all decisions and actions concerning national cu
At the moment there are five official reserve currencies in Russia; US dollar, Euro
sterling, Japanese yen and Switzerland frank. Although Russian Government tries
ruble a status of international reserve currency it is still far from its goal, but nego
taking place between Russia and national banks of other countries.
Figure 4. Euro against Ruble trend during period from January 2009 till April 2010
of the RF)

41
Figure 4. demonstrates fluctuations of Ruble since 2009 till 2010. Since 2007 ICA
in Rubles. Rate of ruble against Euro at the beginning of 2010 was 42.78:18 (Central Bank of the
RF14.01.2010) and it continues to fluctuate. There is a trend at the moment to pur
invoices in rubles between Russian and foreign partners.
Despite the fact that ruble is Russian official currency, many large scale purchase
done in US dollars, e.g. raw materials, land or large quantities of fuel. In the begin
prices for means of production were finally denominated in rubles and investment
market has reached its record high for the 1.5 years. According to Reuters (11.01.
Russian equity funds have reached USD 244 million during last quarter 2009, whi
flows in China, India and Brazil. Stock exchange level rocketed in January and has
more investors. Ruble had experienced the most dramatic daily increase in fifteen
2.6%. Ruble is getting stronger thanks to carious actions of the government, such
Stabilization Fund, but its value is jeopardized by the locals themselves. This fact
dramatic effect in the early 1990‟s when banks and individuals tried to buy as ma
possible to secure themselves and made a huge impact in country‟s economic coll
Milford 2008, 32). No one says it would not happen again one day, but there are s
strengthening throughout the time. Due to multiple trends Sberbank has stopped
in any other currency but ruble to avoid high currency risk. Some experts believe
rather slow economic recovery, Russian ruble will continue to strengthen its posit
dollar at least till the end of March, and will probably weaken in the second half o
of Economic Development of the RF 14.01.2010).
8Центробанк Российской Федерации

42
7 Legislation issues
Legislation environment of the country can sometimes be seen as a rather soverei
most often as a concept within political environment. Legal issues forming that en
differ greatly in Finland and Russia. Law in Finland is descending from the Roman
legal tradition. After joining the EU in 1995 Finnish legislation has to be harmoniz
Company Law Directives. Whole system of business laws in Finland leans towards
and mandatory stipulations (Toiviainen 2008, 220). Although Russia follows the sa
Germanic tradition custom is seen as a source of law, a binding precedent and is s
liberalization of business activities. In many cases interpretation of written laws is
(Foreign Business Support 2005). Legal issues and complications remain one of th
concerns not only for the newcomers but also for experienced foreign companies o
Russian market. Juridical uncertainty gives floor to many violations by corrupted o
dishonest firms as well as to costly mistakes done by the operating company itself
company wishes to do a research on Russian Company Law it is a laudable intenti
specialist in Russia would recommend using services of professional legal offices.
will help with everything starting from registration issues, to custom documentati
reporting terms.
Legislation concerning foreign entities‟ operations is being constantly developed i
common WTO standards, such as reciprocation, obligations of international agree
fulfillment and application of correspondent regulatory means that are meant to b
companies at a lesser extent (Orlov 2010, 344). A foreign company has several opt
choosing the type of legal presence in the Russian market: a representative office,
Limited Liability Company (ООО), joint - stock company (ЗАО) and partnership. Su
are the most common legal type chosen by foreign companies. Any of the subsidia
be registered; representative or branch must get accreditation from local authorit
accreditation system works for the representative office employees, if no more tha
Documents necessary for accreditation of Foreign Representative Office stuff are:
the representative office with request to grant accreditation, an autobiography let
photos against black background and one copy of a passport. After that a tempora
is normally given for a period from three days up to three months (Chamber of Co
Industry of the RF 09.03.2010). It is to remember that in the case of representativ

43
liabilities go through the head office unlike in case of subsidiaries. Representative
cannot generate own income and yet have to fill out quarterly and annual tax state
company can be totally owned by foreigners except the case of unitary enterprises
form, a firm‟s management, or special international department, should study the
regulations on foreign business in Russia and in their sector of economy, practical
establishing own office and preferably list of companies that offer legal advice ser
In order to register an office in Russia, a foreign company must acquire real physi
premises other than residential apartment, which would be checked by the author
for registration purposes. When it comes to board of directors or general director,
citizen as well as a foreigner can be appointed. In case of latter a work permit mu
first. An accountant or any person responsible for accounting and tax reporting m
designated as well as bank account opened. It is always a good option to have it op
foreign bank subsidiary and in the nearest or most convenient branch because ope
different branches of one bank can be complicated and in some cases impossible t
(Federal Tax Service of the RF 2010).
7.1 Visas and work permits for foreign employees
Russian legislation rules labor relationships that happen on the territory of the RF
employer hires a foreign employee but the work activity takes place in Russia it m
accordance with the Russian legislation. This means that contract and other docum
be executed as if in case with native Russian employees.
Every foreigner coming to Russia from Finland must apply for a visa. In case of bu
activities such as company representation or negotiations, a person should obtain
order to get a short-trip business visa a foreigner should apply to the State Registr
or to the Internal Affairs Department in order to receive an invitation from a name
When invitation from a company is received next step is to apply for an actual visa
Embassy of the Russian Federation, which is situated in Helsinki. It is important to
register at the arrival to Russia at the Internal Affairs Department and at the hote

44
If a person needs visa for a longer period, up to twelve months, to stay and work a
branch or representative office in Russia, the procedure becomes more complicate
amounts of illegal immigrants Russian officials are struggling to come up with clea
legislation, but have not succeeded yet. Currently, all foreign representatives fall u
Representative Office and Branch. The office is granting accreditation cards and w
foreign employees (Federal Immigration Service 17.02.2010). The authority that a
to work for must be registered at the Representative Office; then the employee ca
accreditation card, apply for a three month single entry invitation and a three mon
Foreign Representative Office Employee visa. Only after that he or she can obtain
entry one year visa. However, visa is not enough for working in Russia; work perm
granted to avoid penalty or deportation. Normally work permit is given within thre
the procedure goes on simultaneously with visa execution. To avoid any misinterp
faults it is advised to use service of professional law agencies in visa and permit ob
7.2 Taxation
Taxation procedures in Russia are carried out in rubles and no other currency. Th
one unchanged and 100% clear thing about taxation in Russia. Developed from the
current one was introduced in 2001 and is been altered ever since. Taxation is reg
Tax Code; however, regional authorities have the right to set their taxation rates w
by the Code.
Generally there are five types of taxes for the companies: corporate income taxes,
payroll taxes, property taxes and other taxes on specified products. First one cons
to 24% and is imposed upon company‟s interest, dividend, rent etc. It is the major
company‟s activities that take place in the RF only, eg profit from sales or propert
dividends and royalties or even compensation for losses, and must be paid monthl
The second, indirect tax is VAT. It draws 10% on the values of socially demanded g
services and 18% on others. There are cases when VAT can be left out on the basi
taxpayer‟s application accompanied by the proof of turnover of the company being
MRUB. VAT on imports is calculated same way as customs duties and is as well in
excise taxes. If there is no customs border between exporter and Russia, tax must

45
as the sum of the price of goods and excise tax (Federal Tax Service 2010). Compa
with help of agents must be careful when making a contract; it should be clearly n
when can withhold compensation from commission, what are the parties‟ obligatio
and dates of advanced payments. The problems appearing from unclear conditions
contract cannot always be solved positively by court (Foreign Business Support 20
Payroll taxes are meant for employers only and include Unified social tax (from 2%
Insurance against industrial accidents and deaths in the workplace (from 0.2%to 8
valid for both, Russian nationals and foreign employees. Foreign employee, howev
pay from 13% to 30% personal income tax, depending on how many days has he o
Russia during the past twelve months. According to tax legislation, foreign worker
pensions or social security allowance thus the employing company does not have t
premiums for them.
The fourth, property tax, is regulated by regional authorities and thus its rates var
city, but cannot exceed 2.2%. This tax is imposed on all kinds of motorized vehicle
other immovable property. And other taxes include excises, custom and stamp dut
mineral resources extraction, water tax and duty on the use of flora and fauna. Re
State Tax Inspectorate normally lasts around 5 to 7 working days.
General information concerning corporate taxes can be found on the website of th
Service (FTS) of the RF. Unfortunately updates are not always current, e.g. “tax n
information from 2006. But such articles as „newest in tax legislation‟ offer review
changes twice a year. FTS recommends agencies that provide qualified service wi
legislation and calculation, on-line consultation and technical support. Companies
Codex and Consultant Plus are named as reliable; first two offer information in En
7.3 Customs procedures legislation
Russia is a member of the Eurasian Economic Community and thus shares no com
membership with Finland. Although, there is a partnership and cooperation agree
Russia and the EU. Customs work is regulated by the Customs Code that includes
declaration and tariffs, customs crimes and proceedings. Customs Code allows vir

46
of legal import and export (Orlov 2010, 348). Foreign companies that work in Rus
goods for their personal use on the basis of temporary importation regime contrac
products for further sale in Russia must undergo other procedures. Normally, in fo
importer can gain total or partial VAT relief and tariffs, if any paid, should be retu
owner during the export of the given goods. Those goods that are imported as a co
the charter capital of the company must be exempted from the customs duty unde
importation regime contract.
Any person has the right to move goods and means of transport via Russian custom
cases stipulated by the customs law, and pass customs control. However, if some t
article fails to fulfill customs regulations it will be either withdrawn or put in a cus
facility at the expense of the owner (Customs Code, Part 1,Chapter 2). In case when a company
wishes to export to Russia it might consider the most popular and probably the ea
using the service of local customs broker that will take care of all formalities for p
copy of freight inventory and data on its weight customs duty can normally be esti
can even pay the duty to the customs beforehand on behalf of its customer if agree
from 2005 it is also necessary to provide a Hygiene Certificate of imported goods
prove that they are safe for use.
Starting from 1 June 2010 new Law on Customs Regulations should be ratified due
that some issues were missed in the 2009 version of the current Customs Code. Ac
article 168 of a new proposed law it is suggested that customs officials will be gra
confidential banking information and account transactions. It is explained by globa
complexity of a court procedure which is the only way now to grand access to acco
information of the companies. Work on specifications and amendments of this arti
on, but the major concern now is the safety of this information; although any offici
open access to confidential information are obliged by law to keep this data secret
numerous cases of leakage are known. For example, some agencies offer for sale l
such information as passport numbers of individuals and sums at their deposit acc
possible only through the officials‟ immoral behavior (Izvestia 12.03.10).
Any legal or physical person that has suffered from unfair decision or idle procedu
making by the customs has the right to apply in written or orally for explanation o

47
from a certain customs office. The application has to be done within six months fro
decision date or from the day when this person was notified about the decision. Al
information on customs acts must be provided publically and free of charge, besid
the customs office is obliged to provide a consultation for those who require it (Cu
Part 1,Chapter 4). It is important to use all available sources of information when it
customs control and registration and to navigate them skillfully. One of the most c
aspects of dealing with Russian customs is constant changes in regulations due to
agreements on one hand, and unofficial protectionism on the other.
7.4 Information sources
It is obvious that nowadays information sources are not books and periodicals only
Internet. Most of the information from both official and unofficial sources can norm
in two or more forms; printed materials, electronic and sometimes oral if we talk a
mouth and expert consultations. There are some sources of information that are o
companies operating or going to operate in Russia. First of all, any foreign firm ca
information in the Russian market from the Ministry of Economic Development of
Federation9, the Foreign Investment Advisory Council (FIAC)10
. The Ministry mainly assists
exporting activities as well as foreign investments.
Finnish-Russian Chamber of Commerce (FRCC) is an organization that was create
of supporting business activities between Russia and Finland in the first place. FR
full database on Finnish trade in Russia, even lists of companies operating at the t
cities, but this information is normally payable; up to 600€ per list. Membership in
also be an option; company of a size of Fenestra would have to pay some 1 000€ a
fee per year if it wanted to use marketing research service of the Chamber, its info
support as well as possibility to participate in some of the fairs, seminars and train
levels of employees. However, The FRCC operates only in four Russian cities: Mos
Petersburg, Ufa and Ekaterinburg, which narrows the scope of its data application
the end of 2008 821 member companies were registered in the Chamber, number
members has not changed during past few years and remains equal to 104.
9 Министерство экономического развития РФ
10 Консультативный совет по иностранным инвестициям (КСИИ)

48
Other official sources to remember are Russian Embassy in Finland, representativ
companies in Russia and commercial marketing research organizations, which can
in the Internet, can offer needed data to a Finnish company, such as Fenestra Oy.
government also tries to improve the entry conditions for foreign companies, espe
which bring investments into country. Ministry of Economic Development of the R
Federation together with FIAC has developed an Investor‟s Guidebook to Russia w
to read; its aim is to support state and private economic activity of foreign capitals
legal issues and monitoring big projects. Companies like Finpro can offer individu
doing market research, industry overview and etc.
Professional construction industry related fairs, such as Mosbild, Stroisib or small
place annually in different parts of the country, offer a chance to familiarize with n
and new companies. It is always useful to know who are the exhibiting companies
touch with their representatives before the actual fair. The event itself offers oppo
observe potential partners or rivals in mass, so to speak, and gather some informa
When it comes to obtaining industry information from less formal sources, newspa
websites of the Builders‟ Association of Russia or O.K.N.A. Media Group can be us
be unrealistic to try to work in Russia operating with state proven, official informa
Newspapers and magazines, and most importantly, personal exchange of informat
Finnish and Russian partners and just acquaintances are to be considered as a val
Besides, it has been noticed by many domestic as well as foreign companies that it
difficult to get proper, up-to date statistical data on windows and doors sales in Ru
due to the „bad habit‟ of not displaying real sales numbers by companies and entr
due to underdeveloped statistical information gathering system in the RF.
In case of finding Russian native personnel it is appropriate to use personal contac
friends and partners who they would recommend; it is usually the fastest and mos
method. Local and foreign employment offices can also be of assistance to as they
database of qualified workers. And finally, a worker can be found as in any other c
newspaper advertisement. It is however, to remember to choose a reliable periodi
the candidates thoroughly.

49
8 Results
To start data analysis it was first necessary to make a data reduction for the interv
interviews were made by e-mail and thus contained difficult and long questions. O
to face interview and contained, besides core responses, a lot of information which
and valuable but not relevant for this research. All three interviews were seen as s
no relation to each other and, as it was described in the methodology part, questio
and aimed at respondent‟s field of expertise. For this reason some reductions had
answer main research question. The second phase of data analysis, display, includ
categorization or coding. All three respondents had three different lists of question
their field of expertise, with only few similar questions. And the last phase, conclu
performed with reliance on theoretical framework of the research in order to answ
question and sub questions. Some secondary findings were also extracted during t
procedure. In some cases qualitative data is supported by quantitative in order to
general conclusion. For better comprehension research results are divided into fo
validity and reliability, macro and competitive environment, entry modes and seco
8.1 Validity and reliability
In order to keep the high level of validity in this research first, preliminary formula
research question was changed a few times during the course of work for better s
Besides that, conceptual framework of the research was constantly used as a skele
data in order not to deviate from the main topic and research question as well as n
valuable aspect unnoticed. For validity purpose interview questions were construc
that allowed the answers in a given framework. As a result it was possible to comp
answers with research questions. There were several questions that did not fit into
questions of the research but they do not undermine the validity because they serv
secondary findings which are not in contradiction with the framework.
Reliability concerns the repetitiveness of the research and its truthfulness. The lat
claimed in this study as the research process was performed properly. Besides tha
are established and proven ones. And finally, interviewees and other sources of da
scrutinized and found reliable. However, because of the nature of this research th

50
given country in a given period of time with a given state of the window and door
industry, results cannot be generalized. Another reason for this is that one cannot
generalizations from qualitative research (McQuarrie 2006, 100).
8.2 Macro and competitive environment
The research question was “What are the factors influencing performance of a com
the Russian market?” The answers can be listed as follows: bureaucracy, legislatio
corruption, infrastructure, world economy, local regulatory organizations, personn
differences as well as few minor ones. However, it is more clear and reliable to div
answers in same order as conceptual framework, i.e. macro-environmental and co
factors.
Following the first sub question it is easier to put the factors in order of their impo
respondents‟ point of view. According to all three respondents political environme
role and has to be seriously considered when entering the Russian market. Legisla
characterized by respondent A and C as demanding and different from Finnish or
but still rapidly developing towards European standards. Although Russian legisla
more supportive of domestic companies according to respondent C, he claimed tha
are done during the past few years in European direction. The main laws that Finn
should pay attention to are Consumer protection law, tax laws, book-keeping legis
Code. Problems arise mainly because of misperception of Russian laws, e.g. when
Limited Liabilities Companies that Finnish managers are almost unfamiliar with. A
of difficulties is the actual application of laws which by themselves are quite suppo
business activities. Respondent A claimed that all legal issues in Russia are easy to
service of legal agencies, their choice depends on the matter in question. Firstly it
to cooperate with a Finnish agency that has subsidiaries in Russia and thus is acqu
Russian legal system. In a while it might be clever to switch to a Russian legal age
lawyer. In two latter options it is though strongly recommended to use personal co
to find a reliable worker or firm.
Other factors of political environment brought up by respondents were corruption
and double book-keeping, i.e. same as mentioned in Chapter 6.3.1. Although, all th
respondents mentioned that corruption is not that much of a problem in Russia as

51
businessmen abroad think. It exists, of course, but it exists in every other country.
Ria News (19.03.2010) in 2009 Russia has occupied 15th position in the list of Eurasian countrie
that are seen as most corrupted by its own businessmen and experts. Generally th
responses on corruption and book-keeping topics can be drawn as such: it is a rela
trend now, to do business one hundred percent legally, without bribes and double
but companies are willing to follow it. Every player on the market must just build
business partnerships and distribution chains with companies that work with same
Bureaucracy is weakening its positions as well; currently business in Russia is not
„dinosaurs‟ only but also by the whole new class of young entrepreneurs that have
universities of England and the USA and learned international manner of doing th
to respondent A.
There is an ambiguity in research results concerning economic environment. On o
respondent A finds economic situation favorable. He referred to the fact that Euro
Finnish markets are filled up, meanwhile the Russian market is just developing an
great. It is as attractive to foreign investors as China, India and African countries.
related industries are no exception. This can be supported by figures by O.K.N.A M
(16.03.2010) and partly by respondent B.
Figure 5. Forecast for PVC constructions market 2006-2010 (O.K.N.A. Media Grou
Figure 5. shows positive tendencies in PVC construction tendencies for 2010. PVC
base window and door units are currently the most popular and wide spread in the
Chapter 3.2). For that reason numbers in this figure are still valid despite the fact
contain other types of constructions like aluminum and wooden. This figure is part
34
40,4
45,8
36,8 39,2
33
35
37
39
41
43
45
2006 2007 2008 2009 2010
Ml square meters
Year

52
with future prognosis by the Proplex joint-stock company‟s CEO. He has comment
experts expect 5-10% rise in demand. Proplex experts also expect legislation chan
include regulations on energy-efficient buildings which would be favorable for the
(FasadInfo 16.11.2009).
But this, however, will not save the day according to the same Proplex‟ forecast; w
door companies simply produce too much and supply exceeds demand. Probably d
second half of 2010 situation will recover. Figure 6. (OKNA Marketing 16.03.2010
showing negative development of plastic window units market in the RF that supp
part of Ploplex prognosis and the following data.
Figure 6. Forecast on growth rate of plastic window units‟ market (OKNA Market
Current situation of the industry and economic situation in Russia dictates the like
very few new entries in the window and door sector in the nearest years. Firstly, t
lack of demand; although buyers‟ interest is slowly growing again it is not great e
Secondly, prices on raw materials such as PVC and plane glass continue to rise an
unlikely to give discounts to newcomers. Even such giants as Rusal are forced to k
price levels; besides, big suppliers always prefer state orders to private and smalle
Technological development cannot yet be seen as a decisive factor in window and
construction industry for the reason of slow pace as it was mentioned in Chapter 4
technological factors can be followed in changes of „recipes‟ of profile systems co
14,4
14,6
14,8
15
15,2
15,4
15,6
15,8
16
16,2
2008 2009 2010
Percentage
Year
Growth in %

53
“Green Line”. It uses Ca-Zn as its components and can be seen as more environme
and safe during its production (but not in recycling). Another trend is gluing the p
profile, which allows more light transparency (OKNA Marketing 19.03.2010). One
innovation is a so-called spider system which avoids plastic or wooden frames for
glass holds on to elements of the bearing structure of the building itself with help
shaped fasts. This system allows more daylight inside the building and is easy to h
necessity to replace a broken glass. However, use of spider systems is still underd
not wide spread (O.K.N.A. Media Group 18.03.2010). Companies that produce com
spider systems are currently actively looking for partners, which can be seen as an
Social factors are mainly seen important in terms of determining existing and pers
and as a cultural aspect, i.e. finding common language with Russian partners and
Respondent B claims that Russian key personnel is more committed to their work,
more flexible than fins, although, full commitment to work is lacking when it come
directors. “They simply hide if tasks are dragging” comments respondent B. Quest
personnel is very topical, according to respondent A. There are many factors to be
when the decision is made on whether to hire Russian or Finnish personnel. On on
a firm hires Finnish employees to work in Russia, it has to pay them „Finnish‟ sala
expenses on housing, transportation, insurance and even school for employees‟ ch
expensive, but thinking that Russian employee will be cheaper can be very wrong.
respondent A, a good Russian manager in Central area can require up to 15 000€
Besides wages, there is also an issue of criminal character, known as “reidering” (
This is a process of conquering a company against the will of its owner or director
performed by managers of the same company. Once again, according to responde
advised to hire Russian managers with reference on personal contacts and recomm
Together with macroeconomic factors competition ones have proved to be essenti
entrant. Every entrant must evaluate whether current risks are comparable with p
otherwise growing Russian market can bring (see Chapter 4.2.5). Respondent B cl
currently there is some unhealthy competition in the Russian market, which in the
lead to severe problems in housing industry. Some competitors tend to copy other
patterns. The respondent stressed that it would be nice to see more Finnish compa
Russian market. To get more detailed and reliable information on competitive com

54
better to follow Federal statistics, Central bank statistics and company‟s own sour
respondent B stresses.
Analysis of supplier base showed that currently most popular suppliers of PVC and
profiles and components are Korean based, international company LG Hausys; Ma
office in Salzburg; VEKA, which is probably the most popular brand in Russia; Pro
(subsidiary of Profine GmbH); and also Deceuninck, CREON, REHAU, Roto, VITRA
BrusBox, KBE and Proplex. In Moscow region such suppliers as TBM, Firesa, BAJ
Profi or ARtek offer their partnership; in St Petersburg VBH or Russian Trade Com
of service to the commissioning party. Finding both supplier and retailer of windo
units‟ components or even raw materials near Moscow or St Petersburg should no
According to respondent A, building a distribution chain is not that difficult but mo
consuming process. Respondent B also mentions the necessity simply to pay atten
differences of that process in Finland and in Russia. Many doors and window units
now combine both production and distribution within one organization; they can b
a direct rivalry in some cases. Otherwise no other threat from substitutes or new e
seen as critical.
According to respondent B, it is maybe not the best time now for new entries. Kee
develop existing activities is more effective. Current industry situation cannot be e
most attractive for the newcomers; partly due to the barriers mentioned in Chapte
because of the recent attempts of the existing companies to attract customers by l
have already led to the price bottom situation and it is likely to remain such for a w
circumstance creates unfavorable conditions for a new entrant. Respondent B also
domestic competition in the Russian market is very creative and tough, however, R
often do not pay as much attention to their brands or reputation, so that is exactly
competitive advantage of Finnish companies can lay if they chose to follow differe
focus strategy.
8.3 Entry modes
Second sub question of the research question concerned the choice of an entry str
considering the above mentioned factors. Generally it can be concluded that it dep
objectives of the company and resources available. According to respondent A, ba

55
exporting can be seen as a first step for many companies, but sometimes customs
legal regulations may force company to find a cheaper or easier option, acquisition
establishing new venture etc. It depends on scale of production and made for deve
competitive advantage; sometimes forms of presence like factory acquisition can s
logistics or reduce time of delivery to a customer. Management has to calculate, c
conditions, which option would be the best. When deciding on entry mode first of a
should find distributors and importers, which can be same or different companies,
clientele base, consider entrance and membership in regulatory necessary organiz
figure out what entry mode will suit best, according to respondent A. It is hard to
general level of success of one of another mode, e.g. foreign acquisitions are very
conduct and can lead to a failure; which can be said about franchising, licensing a
Although, respondent C notes that the most common and easiest to register form o
presence in Russia for companies is Limited Liabilities Company (OOO). It is nece
Finnish managers to familiarize themselves with this form thoroughly and conside
normally more details to take into account when registering any form of legal pres
than in Finland. It might be worth collecting information with help of professional
general level of success of one or another form of legal presence. For example, fra
became known in Russia in the early 1990s; mostly it was used by foreign food cha
McDonalds and Pizza Hut. It was not until 15 years ago when Russian companies
the franchising approach in order to gain recognition over the country and increas
were food chains as well, but also drug stores and retail chains. Normally, franchi
seen as profitable for several reasons. First of all, Russian customers tend to trust
and thus good demand is practically guaranteed. Secondly, this approach is useful
territories. And finally, labor force is cheaper. The other side of the coin is poor pr
franchisor rights so it is recommended to cooperate with the Russian Association o
they can assist in many legal issues. Franchising is most developed in Moscow and
areas. According to reports of The International Franchise Exhibition BUYBRAND
there were 138 franchising brands registered in Moscow area (Franchise Internat
8.4 Secondary findings
During the process of data collection and analysis few secondary findings were ma
concerns the SROs initiative. Basically respondents are still unfamiliar with it due

56
it is a very new thing. It might be better for the entering company to look into this
own resources and with time familiarize itself with all advantages and disadvantag
membership can give in the future. Second finding is of a rather personal characte
managers‟ aspirations play important role in foreign trade, it has to be mentioned
negative or burdening issues of doing business in Russia a manager that wishes to
must remember that it is a kind of job for adventurous, daring and tough people. A
respondents A and B it is challenging and sometimes extreme, every next day brin
new, but it is very rewarding as far as one can do his/her job well. Being a vice pre
respondent B comments
Take it seriously... It takes time and requires many cases serious investments.
personnel and make your business to run locally. Business in Russia needs 100
commitment and presence at place, this business can‟t be remote controlled f
HQ (Rissanen 15.03.2010).

57
9 Conclusion
The aim of this research was to overview factors of macro environment and compe
Russian market in order to assist the commissioning party in situation analysis and
mode. This work was started by formulating the research question and sub questio
the way in which the research must be performed. Three main concepts were chos
theoretical answer to these questions; market research, five forces approach and i
markets entry modes. Based on this framework three interviews were developed.
performed by e-mail and face-to face with experts in field of international trade an
answers were used to analyze the validity of political, economic, technological and
well as competitive environment forces and to and give answer to the research qu
During the analysis of collected theoretical and empirical data it became clear tha
environmental factor most important role for the commissioning party play politic
economic factors. Not only are they strong forces but they are at some extend uns
Due to this reason, it is recommended to perform very thorough market research b
any business activity in the RF. Among Porter‟s five forces direct rivalry and supp
manufacturer-buyer chain are of most importance in the industry. However, it was
draw a clear conclusion on what entry mode would be the most appropriate for th
commissioning party, because first it is necessary to familiarize with company‟s o
assets. Possible pitfalls and threats of every entry mode were introduced in order
general picture.
Such issues as membership in Self Regulating Organizations, Custom Code, taxati
registration of companies as well as possible general risks of the Russian market e
through in the research too. This was done because otherwise holistic approach w
impossible and some puzzles would be left out of the picture. During the course of
became obvious that there are some issues that Finnish companies‟ managers are
familiar with, some issues are being misinterpreted and some remain pretty much
the authors point of view this research brings the reader closer to understanding o
conditions, and more precisely of door and window units industry, in Russia and h
entry circumstances, strategic steps and management tasks before the Russian ma

58
This research was very fruitful from the author‟s point of view for several reasons
one is that the research questions were mainly answered. The other result is gaine
different information sources and data gathering procedures available in Russia. T
shown that it is still sometimes impossible to obtain some data due to underdevelo
information system in Russia; Internet has proven to be useful but personal contac
publications normally offered more comprehensive and full information. And, of co
experience gained by the author during the research process can be seen as a valu
Mostly the process was flawless and smooth; conceptual background was easy to f
interviewees were eager to answer the questions and results were somewhat expe
obstacles appeared, as was mentioned earlier, due to lack of available and free of
information. Otherwise the research can be seen successful.

59
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62
Appendices
Appendix 1. Interview questions YIT
Haaga-Helia University of Applied Sciences
Respondent Juha Rissanen, YIT 04 March 2010
1.For how long have you been working in YIT Moskovia? In what position?
2.Do you find working conditions (communication within colleagues and with officials)
those in Finland? Where do you see the biggest differences?
3.Are you familiar with the corporate strategy of YIT? Do you feel that it‟s fulfilled in e
operations?
4.How often do you (your team) review companies‟ objectives?
5.Would you describe current construction industry situation in Russia as favorable fo
6.Who do you think are you most serious competitors; Russian or Finnish companies o
Russia? May be from some other countries?
7.Would you describe competition in the Russian construction market as severe?
8.Would you like to see more Finnish companies in the Russian market?
9.What is your opinion about SROs (Self Regulating Organizations)? Do they make you
easier or the other way round or do you feel any impact from them at all?
10.Does the relationship of YIT with retailers and suppliers differ from one in Finland f
opinion?
11.What is the most threatening or unpleasant issue in operating in Russia from your p
12.Did you have to deal with fraud or unreturned debts from your clients? If yes, at wh
13.Do you see corruption in Russia as an extreme barrier for foreign business developm
14.Can you name any third forces that, from your point of view, influence the YIT busin
15.Have you noticed any obstacles when trying to obtain necessary marketing informa
16.What sources of information in Russia you find most reliable and valuable?
17.What is it that you would describe as most rewarding in working in Russia?
18.What would be your advice to a manager of a Finnish company who wishes to enter
market?

63
Appendix 2. Interview questions Finpro
Haaga-Helia University of Applied Sciences
Respondent Leppänen Aleksej, Finpro 11 March 2010
1.For how long do you work at Finpro/in your current position?
2.What do you find more effective in working environment in Russia, personal conta
business approach?
3.What is it that you would describe as most rewarding in working in Russia?
4.Do you believe that Finnish companies‟ presence in the Russian market is import
5.What international markets do you see as most perspective for Finland at the mom
industry?
6.Do you see exporting as suitable a first step in entering the Russian market?
7.What are the main obstacles that scare Finnish managers of the Russian market?
8.What entry modes in Russia are most popular among Finnish construction industr
9.From your point of view, what are the main differences between entering Russian
country market?
10.Do you see many companies leaving the Russian market now/during the crisis?
11.Is construction industry in Russia attractive enough for foreign investments at th
12.What is the level of success of foreign acquisitions in Russia by Finnish companie
13.How do Finnish managers prefer to deal with issues of Russian legislation?
14.Is it preferable to hire Russian employees or bring ones from Finland?
15.What is the general attitude among Finnish managers towards double bookkeep
16.Is the SROs initiative popular among Finnish companies working or entering the
market?
17.What form of data collection Finnish companies prefer; agencies, own departme
18.What are the main complaints concerning distribution chains in Russia?
19.What do you think is the most common reason that makes Finnish companies lea
Russian market?
20.What would be your advice to a Finnish company manager who wishes to enter t
market?

64
Appendix 3. Interview questions FRCC
Haaga-Helia University of Applied Sciences
Respondent Petri Kekki, FRCC 12 March 2010
1.For how long have you been working in FRCC in your current position?
2.Is your specialty Finnish or Russian legislation, or both?
3.Do you think that Finnish companies entering the Russian market prefer legal serv
FRCC or of Finnish/ Russian legal agencies?
4.Does FRCC cooperate with any legal agencies or organizations in Russia?
5.Do you personally see legal issues of the Russian market as a real obstacle for Finn
If yes, at what extent?
6.Do you believe that recent Russian legislation developments are favorable to dome
business?
7.Can you name the laws (of both Russian and Finnish legislation) that are the most
your work?
8.From your opinion, to which laws Finnish companies must pay most attention when
the Russian market?
9.What main differences in the corporate law of the two given countries are to be co
mostly?
10.Would you describe Russian „business laws‟ as supportive of business initiative?
11.Does legal and public registration of business differ a lot in Russia and Finland?
12.What form of legal presence (eg Ltd or partnership) do you see as the easiest to r
Russia?
13.Have you heard many (if any) complaints from Finnish managers about indecent a
agencies in Russia (eg about bribes, selling misleading information etc)?
14.If there was one big change that you could make in Russian business law what wo