Challenges of Doing Business in Russia

This assignment examines the complexities of doing business in Russia. It highlights major challenges such as hierarchical systems, time management issues, and increasing corruption within the country's legal and economic framework. The report focuses on how these factors impact developing economies and the strategies needed to navigate them successfully.

MARKET ANALYSIS
REPORT

Table of Contents
INTRODUCTION...........................................................................................................................1
1. The local business environment..............................................................................................1
2. Competitive, legal and cultural risk and challenges................................................................2
3. Entry strategy and general business strategy..........................................................................4
4. Recommendation.....................................................................................................................5
CONCLUSION................................................................................................................................5
REFERENCES................................................................................................................................7

INTRODUCTION
Emerging markets are the countries who holds the characteristics of developed economy
and market but are little far from completely turning into Developed country. The report will
analyse the market of Russia which is one of the largest nation and emerging market. Further, it
will evaluate the business environment of Russia and the future of potential of its market to
emerge. Moreover, it will outline the competitive and legal challenges which are faced by
market and are which needs to be challenges as per market fluctuations. Thus, it will identify
general and entry business strategy which is being followed in Russia.
1. The local business environment.
Russia being one of largest emerging market has major business industries which
comprise equipments for agriculture like, machinery, construction, tractors etc. Further it has all
the high performance machinery like, aircraft, space vehicles, rolling mills etc. Apart from this
the extractive industry of Russia comprise production of gas, chemicals, oil, coal, metals,
handicrafts, food crops etc. In addition, the defence industry of firm involves advanced power
generators, transmitters etc. Thus, the country also has advanced transport facilities and updated
equipments. The local business environment of Russia is equal for all and is based on grabbing
more and more growth and development opportunities. Further, to improve business growth and
environment the Russian government has enforced in which the commercial dispute of citizens
will be resolved within year. The country is focused on providing support to small and medium
size enterprises which is the major reason behind increasing developing in Russian economy. In
accordance to Russian Union of industrialist and entrepreneurs it has been determined that
despite of the fact that there are minor hindrances which are caused by legal and economic
factors the business environment of country is growing and established effectiveness in their
operations (Ahmed, Coulibaly and Zlate, 2017). Th contribution of business to the economy is
the major factor which assisted the Russia in turning into country into emerging market.
Besides, the competition in business environment of emerging is tough and it is the reason
behind increasing innovation in Russian products and services. The major benefit of Russian
market and business environment is the support from educated population, the education system
of Russia is best and there are almost 90 percent of people are graduate which denotes that only
10 percent of the crowd is not considered in literacy rate. The graduate students are qualifies and
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denotes the highest literacy which is the major function of modern economy (Logue, 2017).
Thus, it is the major factor which assist the country in establishing growth and making
innovation in business environment which is increased competition not only at domestic level
but at global level.
Apart from this Russia is known for its natural resources as it is the world largest leading
producers oil, iron ore, gold etc. In addition, the business environment of Emerging market also
holds strong control over its agriculture products and equipments for which many development
countries demand Russian minerals, equipment and food crops. It is the factor which
demonstrate the growth and stability of Russian business environment. The legal and political
factors of Russia keeps functioning as per the changing trends of emerging market but with the
due stability the organisation are able to manage turmoil's. Apparently, it been analysed that
these fluctuations n Russian market by government is to provide support to small and medium
business enterprise which further denotes the success of Russian business environment (Latukha,
2018). On the other hand the success of business environment of country is regulated by its
strong financial system. After the default of 1998 the federal government focused on
restructuring the entire economy where the Russian citizens focused on establishing a strong
control over investing instead of seeking for support form external investors. Moreover, to make
it more viable and strong the Russian bank stated taking risk to enhance and develop economy
and it is the major factor which assisted the Russia to survive the financial crisis of 2008. Thus,
according to all these factors it has been identified that there are various fluctuation in merging
market and its business environment but the education system and control over finance and
resources assist the business enterprise stabilising their operation in heading towards growth and
development (Bogatyreva and et.al., 2017).
2. Competitive, legal and cultural risk and challenges.
Russia is the largest nation and has emerging market as compared to all developing
countries. It has been analysed that the economy and market of Russia has bee strengthen after
the dissolution of Soviet Union in 1991 (Logue, 2017). It has been demonstrated that the
economy faced various turmoil but all the fluctuation assisted the county in growing strong and
establishing strict business policies and practices. Thus, the country has federal type of
government in this the power is divided among two parts that is small local government and
strong national government. There are various challenges faced by emerging market due to
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which the business enterprises faces roller coaster rise of development and competition. The
current challenging factor of Russian legal system is to change framework in order to protect
minorities corporate stakeholders. Russia being an emerging market faces challenges due to its
cultural factors which are as follows:
 Punctuality: The Russian environment is based on Poly chronic culture which
demonstrate flexibility factors. In this the employees in organisation are given time and
working flexibility which is major factor hampering the growth of merging market
(MacLachlan 2010). For instance, if in case the person is getting call or message in
middle of meeting than the person is allowed to answer of take a message instead of
continuing meeting. It is the factor which interrupts the linear agenda of continuous
business functions.
 Hierarchy: The hierarchical concept of Russian is the major drawback and is the major
obstacle for the growth of economy. In this the ultimate decision making power is with
the top management and authority. The top authority in Russia is either denotes by
position or by age. Thus, It is the factor which hampers business relationship in country.
 Negotiating: Russian do not believe in the concept of compromising due to which the
decision making process in country consumes time (MacLachlan 2010). In this process
the power of making people agreeing on one common interest becomes null due to which
many business decisions remain pending and it is another cultural challenge which is
hampering the growth of economy.
Apart from this there are legal risk and competitive challenges faced by country which are
described under:
 The U.S. could expand sanctions on Russia: With this expansion the Russia will have
to face difficulty in complying with international law (Abdullaev, 2017). In this the
companies will be grey zoned by US administration due to which the firm will be
working for sanctions.
 Corruption rate: It is the foremost legal risk for merging market because Russia has 2.1
corruption rate which is highest in comparison to all emerging market across the globe. It
is the major factor which restrict the investment from outside investors in country.
Increasing competition is the challenges for emerging market because in this the enterprises have
to focus on reducing cost of products and services, improving quality and making innovation in
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services. However, Ministry of economic development in country is the major risk competition
because in this the firms are liable to follow good and effective practices in order to improve the
efficiency in business operation (Russia: Doing Business in Russia - Competition Policy and
Growth, 2010). The competition framework of Russia comprise, welfare of consumers,
enhancing economic efficiency by innovating products, offering at affordable prices, and making
optimum utilisation of resources in order to minimize waste. These are the practices which the
business enterprises need to follow which some times becomes challenging for the organisation.
3. Entry strategy and general business strategy.
Russia is the market for long term as quick terms and easy win strategy do not work in
this merging market. It offers market for sophisticated American firms who have clear
determination of products and services (Russia - Market Entry Strategy, 2017). In this economy
the only firm are allowed who have significant capital and time to devote on the roads of success.
The ultimate market strategy motive of emerging country is to make its market cheap and for
long term. Entry strategy in Russia involves knowledge of practical and logical research plan.
Further, it is important for the companies to evaluate pestle analysis of Russia market which
assist the firms in analysing the fluctuation in political, legal, economical and social factors.
Therefore, in order to resist emerging country the business need to evaluate all the fluctuation
and changes like only long term market and business plan can resist Russian market because
easy wins are not supported by economy. Moreover, it is important for the firm to analyse the
hierarchical system of economy because it is the major cultural challenge which determines the
stability of business operations in Russia. Thus, in accordance to this it is has been determined
that franchising is the most effective market strategy which can resist the business operations of
emerging economy. In this strategy one particular brand allows the existing interested companies
of Russia to sell its products and use its brand name. It is the most effective entry strategy for the
country which assist the market in continuous growth and development.
However, foreign direct investment is the business strategy which is generally being used
in emerging market as it assist the economy in increasing outside investment from investors
according to their interest in specific business products and services. It is the most effective
practice which allows the flow of money and international economy in Russia and promotes
economic development (Smith and Thomas,2017). Apparently important and export is the
another strategy which assist Russia in improving and establishing its market operations. In this
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strategy the Russian market export its advanced high performance machinery like, aircraft, space
vehicles, rolling mills etc. to India, Brazil, Poland etc. Moreover, the export business of Russia is
the ultimate reason behind the growth and performance of economy because country is known
for production of natural resources like, oil, gas, chemicals, coal, metals, handicrafts and food
crops (Bondarenko and et.al., 2017). In accordance to import and export strategy the Russia has
improved and established its existence across the globe which is the ultimate reason behind its
characteristics of emerging market.
4. Recommendation
In accordance to risk, challenges, development of market, business and economy of
Russia, one of the largest emerging market nation it has been determined that there are may
factors and changes which can assist the country in becoming developed from developing.
Therefore, as per the situation, challenges and risk there are various recommendation which can
be made to improve and manage challenge. Some solutions and recommendations are as follows:
 The economy should change the system of hierarchy and focus on implementing flat
structure which will assist the market in making effective decision as it motivates
employee participation for whom decision is made.
 The emerging country should focus on maintaining punctuality in business functions as it
will assist economy in managing business, economic and market operations effectively.
 It is import for the Russia to formulate strategies to reduce and eradicate corruption from
economy because it is the practice which is hampering the outside investment in country
which is major factor of development.
CONCLUSION
The report summarized about market analysis report on Russia which is one of the largest
nation and emerging market. Further, it has evaluated the business environment of country which
states that business environment of country is regulated by three key drivers which are educated
population, strong financial system and extraction and production of natural resources. Besides,
the report outlined franchising market entry strategy which reduces the risk of entering into
emerging market. Moreover, it analysed general business strategies used in countries which are,
import and export and foreign direct investment. Thus, the report concluded hierarchical system,
punctuality and increasing corruption in Russia are the major cultural legal and completive
challenges which are being faced by developing economy.
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REFERENCES
Books and Journals
Ahmed, S., Coulibaly, B. and Zlate, A., 2017. International financial spillovers to emerging
market economies: How important are economic fundamentals?. Journal of
International Money and Finance. 76. pp.133-152.
Bogatyreva, K. and et.al., 2017. As different as chalk and cheese? The relationship between
entrepreneurial orientation and SMEs’ growth: Evidence from Russia and Finland.
Journal of East-West Business. 23(4). pp.337-366.
Bondarenko, A.V. And et.al., 2017. Marketing and Logistic Instrumentarium of Activation of
Inter-Country Cooperation of Russia and Solving the Issue of Import Substitution.
European Research Studies Journal. 20(1). pp.105-116.
Latukha, M.O., 2018. Can Talent Management Practices Be Considered as a Basis for
Sustainable Competitive Advantages in Emerging‐Market Firms? Evidence from
Russia. Thunderbird International Business Review. 60(1). pp.69-87.
Smith, N. and Thomas, E., 2017. Regional conditions and innovation in Russia: the impact of
foreign direct investment and absorptive capacity. Regional Studies. 51(9). pp.1412-
1428.
Online
Abdullaev N. 2017. Russia’s Top 4 Business Risks in 2018. [Online]. Available through:
<https://themoscowtimes.com/articles/russias-top-4-business-risks-in-2018-op-ed-
60005>.
Challenges of Doing Business in Russia
Logue C. A. 2017. The Emerging Market in Russia. [Online]. Available through:
<http://www.dummies.com/personal-finance/investing/emerging-markets/the-emerging-
market-in-russia/>.
MacLachlan M. 2010. Challenges of Doing Business in Russia. [Online]. Available through:
<https://www.communicaid.com/cross-cultural-training/blog/challenges-of-doing-
business-in-russia/>.
Russia - Market Entry Strategy. 2017. [Online]. Available through:
<https://www.export.gov/article?id=Russia-Market-Entry-Strategy>.
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Russia: Doing Business in Russia - Competition Policy and Growth. 2010. [Online]. Available
through: <http://www.worldbank.org/en/news/feature/2010/11/26/competition-policy-
growth>.
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