This is the second posting from Obninsk, Kaluga Region of Russia. The following are some additional observations on the Russian market
In the Russian market the problems foreign firms face are not always the fault of the Russian side
Over the years there has been a lot of press given to the problems foreign firms have faced when entering the Russian market. Often these reports blame the Russian side as being corrupt, unreliable or at fault in some other way. Certainly, in many cases this is true. There’s no denying it. However, let’s put the situation into perspective. First of all, we don’t always hear of the success stories. Perhaps this has changed as stories of foreign firms investments in Russia now make regular headlines. However, when problems involving foreign firms entering the market have occurred, do we ever hear the other side of the story?
Some Russian business men that I have talked to have told me stories of the difficulties they have had in dealing with foreign businesses. They tell of foreign firms looking only for a quick profit. In other cases I have heard of foreign firms not being willing or interested in developing an understanding of the market. Instead, they take a very ethnocentric approach and wonder why their Russian partner doesn’t do everything according to the culture and practices of their home country. I even heard a story of a firm waiting for nearly a year to receive payment from the foreign firm even though the terms of the contract were fulfilled. The lesson is that we should naturally expect international business to be more complicated than in one’s domestic market. However, before we beginning pointing fingers when things go wrong, we should try to understand both sides of the issue. Having an understanding of each other’s markets, business cultures and practices, as well as investing in getting to know our business partners will go a long ways towards avoiding major problems. Fortunately, the firms I have been working and communicating with concerning their ventures into Russia seem to understand this important point.
The major challenge facing firms in the Russian market
Over the past few years I have been talking to a lot of business owners and managers, both foreign and Russian, about the challenges they face in the Russian market. Their answer has been almost unanimous. Finding qualified employees is their biggest concern. In fact, it is a problem in many parts of Russia. A growing economy means firms are expanding operations and are in need of qualified managers and technical expertise. The Kaluga region southwest of Moscow is a classic example. The region has just over a million people, but has experienced a combination of strong internal growth, plus an onslaught of foreign investment in production facilities from the likes of Volvo, Volkswagon and others. The result has been huge increases in the demand for management and technical talent.
Russian business schools move into the corporate sector
After lecturing in St. Petersburg last week one of the things that I want to mention is the growth in business education in Russia. MBA programmes are everywhere. In addition, large numbers of Russian students regularly travel abroad for education. The challenge for many of the programmes operating in Russia is that they are undergoing major changes in their approach to education. Many of these programmes are private and, as such, are developing a more market-based approach to education. One area where many schools are focusing on is the corporate market. Several schools now offer tailored programmes for companies. Overall, the demand for company training and education programmes is definitely a growth market.
Saturday, March 1, 2008
Thursday, February 28, 2008
Greetings from the Russian Market
Greetings from Obninsk, in the heart of Russia. I am spending the week here lecturing in St. Petersburg and giving a training seminar in Kaluga region. I decided to include some personal observations that I have made on this visit as well as the numerous business trips I have made over the last 10 years.
Obninsk, Kaluga Region
When you travel by train between St. Petersburg and Moscow, you will quickly notice that the construction market holds a lot of potential. Old dilapidated buildings are a constant sight. As one nears the major cities of St. Petersburg and Moscow, the amount of new construction projects will also become very evident. The construction industry is a good indication of a robust and growing economy. Many companies benefit, either directly or indirectly from such a healthy industry and market. Many of the companies we work with in the Jyväskylä region in one way or another depend on new construction projects for their continued growth. So it’s natural that they would be interested in what’s happening with their eastern neighbour.
Business is about relationships
In order for foreign companies to benefit from the opportunities offered by the market, they need to first understand the market and then take a proactive approach towards it. Unfortunately, many individuals and companies have a somewhat distorted view of the Russian market. It’s natural for the media to only report the negative about trying to do business here. Of course there are problems. However, the better you understand the problems, the better you can avoid them. One should also learn about the business culture. For example, one thing I have observed in my numerous travels in Russia is that Russians place a tremendous value on developing the business relationship. It is more personal than in many other countries such as Finland, the USA and Germany. Therefore, foreign business people need to take time to invest in and develop the relationship. How many times have I seen Americans and others fly into town with the expectation of leaving with a signed contract that very same day. That just isn’t going to happen.
Your market needs to be developed
For many advanced products and technologies, the market is already there. So don’t think you can pass off your obsolete product and technology versions to Russian customers because they aren’t buying! Whenever possible, Russians want to buy the latest products.
For many products, especially many specialty and technical ones, the word seems to be that “although there isn’t a market for this product now, there will be in the future.” So a company can wait for the future, or they can make it happen now. They can do so by thoroughly researching the market. A good dedicated Russian partner can also be very valuable here. By continuously working with them, you may be able to identify a “beachhead” or niche into the Russian market. Once established, you can leverage your success into other niches and segments of the market.
Obninsk, Kaluga Region
When you travel by train between St. Petersburg and Moscow, you will quickly notice that the construction market holds a lot of potential. Old dilapidated buildings are a constant sight. As one nears the major cities of St. Petersburg and Moscow, the amount of new construction projects will also become very evident. The construction industry is a good indication of a robust and growing economy. Many companies benefit, either directly or indirectly from such a healthy industry and market. Many of the companies we work with in the Jyväskylä region in one way or another depend on new construction projects for their continued growth. So it’s natural that they would be interested in what’s happening with their eastern neighbour.
Business is about relationships
In order for foreign companies to benefit from the opportunities offered by the market, they need to first understand the market and then take a proactive approach towards it. Unfortunately, many individuals and companies have a somewhat distorted view of the Russian market. It’s natural for the media to only report the negative about trying to do business here. Of course there are problems. However, the better you understand the problems, the better you can avoid them. One should also learn about the business culture. For example, one thing I have observed in my numerous travels in Russia is that Russians place a tremendous value on developing the business relationship. It is more personal than in many other countries such as Finland, the USA and Germany. Therefore, foreign business people need to take time to invest in and develop the relationship. How many times have I seen Americans and others fly into town with the expectation of leaving with a signed contract that very same day. That just isn’t going to happen.
Your market needs to be developed
For many advanced products and technologies, the market is already there. So don’t think you can pass off your obsolete product and technology versions to Russian customers because they aren’t buying! Whenever possible, Russians want to buy the latest products.
For many products, especially many specialty and technical ones, the word seems to be that “although there isn’t a market for this product now, there will be in the future.” So a company can wait for the future, or they can make it happen now. They can do so by thoroughly researching the market. A good dedicated Russian partner can also be very valuable here. By continuously working with them, you may be able to identify a “beachhead” or niche into the Russian market. Once established, you can leverage your success into other niches and segments of the market.
Wednesday, February 13, 2008
Discussions on International Business and Marketing in Jyväskylä, Finland
Welcome!
In our International Business Programme here in Jyväskylä, Finland we are always emphasizing the importance of effective communication in business (maybe because we see so little of it here). However, in conversations with business people and others from Jyväskylä and our partner regions in Russia, the USA and other countries, they agree that we need new forums for sharing ideas and opinions. So I thought I would jump on the blog "bandwagon" and contribute in my own little way.
Your comments are and contributions are most welcome!
In our International Business Programme here in Jyväskylä, Finland we are always emphasizing the importance of effective communication in business (maybe because we see so little of it here). However, in conversations with business people and others from Jyväskylä and our partner regions in Russia, the USA and other countries, they agree that we need new forums for sharing ideas and opinions. So I thought I would jump on the blog "bandwagon" and contribute in my own little way.
Your comments are and contributions are most welcome!
Poor customer service is a management problem
......and not only a marketing problem
Recently my 1st year International Business students here in Jyväskylä had to write a report on Michael LeBeouf's book "How to Win Customers and Keep Them for Life." One task was to reflect on an incident or two of either good or bad customer service that they personally have received. It was no surprise that most of them mentioned incidents of bad customer service. This should tell us something - we tend to remember incidents of bad service better than the good. No surprise there. However, I also noticed that many of them complained that the poor service was due to the person delivering the service, such as a store clerk or waiter. However, on further reflection many of the students came to the conclusion that the real fault was in the way the business was run. Nothing could be more true!
Many Finns, and especially foreigners living in Finland, constantly complain that customer service is generally poor here in Finland. Some complaints are not justified as Finland is one of the world's leading countries in adopting and utilizing technology to improve customer service. Where the complaints usually come from is in regard to the human element. Personalized customer service in Finland is seen by many as being cold, impersonal and often outright non-existent. Of course this outlook may reflect one's own cultural or personal viewpoint. However, if we look at the customer service question from a managerial standpoint, the problem becomes very clear.
For example, last weekend I was having dinner in a restaurant. It was a normally crowded Saturday evening. Unfortunately, after placing my order I had to wait approximately one hour and fifteen minutes for my food to arrive. Now it would be easy to blame the waitress. However, she and the rest of the staff were working their tails off. It was obvious the real reason was that the restaurant was understaffed. Management is to blame. Actually, when you think about it, management needs to take the blame in nearly all instances of poor customer service:
1. The waiter was rude or incompetent - Who hired the person? Who failed to provide proper training?
2. The service was slow - Who is responsible for staffing and organizing the workflow?
When bad things happen, it is management who is responsible for making things right. Or better yet, management should attempt to prevent as many bad incidents from happening as is possible.
The same is true in business to business, industrial and high tech markets. Unfortunately, management often fails to see the effect that customer service has on the profitability of the firm. In later posts I hope to touch on these issues in more detail.
Recently my 1st year International Business students here in Jyväskylä had to write a report on Michael LeBeouf's book "How to Win Customers and Keep Them for Life." One task was to reflect on an incident or two of either good or bad customer service that they personally have received. It was no surprise that most of them mentioned incidents of bad customer service. This should tell us something - we tend to remember incidents of bad service better than the good. No surprise there. However, I also noticed that many of them complained that the poor service was due to the person delivering the service, such as a store clerk or waiter. However, on further reflection many of the students came to the conclusion that the real fault was in the way the business was run. Nothing could be more true!
Many Finns, and especially foreigners living in Finland, constantly complain that customer service is generally poor here in Finland. Some complaints are not justified as Finland is one of the world's leading countries in adopting and utilizing technology to improve customer service. Where the complaints usually come from is in regard to the human element. Personalized customer service in Finland is seen by many as being cold, impersonal and often outright non-existent. Of course this outlook may reflect one's own cultural or personal viewpoint. However, if we look at the customer service question from a managerial standpoint, the problem becomes very clear.
For example, last weekend I was having dinner in a restaurant. It was a normally crowded Saturday evening. Unfortunately, after placing my order I had to wait approximately one hour and fifteen minutes for my food to arrive. Now it would be easy to blame the waitress. However, she and the rest of the staff were working their tails off. It was obvious the real reason was that the restaurant was understaffed. Management is to blame. Actually, when you think about it, management needs to take the blame in nearly all instances of poor customer service:
1. The waiter was rude or incompetent - Who hired the person? Who failed to provide proper training?
2. The service was slow - Who is responsible for staffing and organizing the workflow?
When bad things happen, it is management who is responsible for making things right. Or better yet, management should attempt to prevent as many bad incidents from happening as is possible.
The same is true in business to business, industrial and high tech markets. Unfortunately, management often fails to see the effect that customer service has on the profitability of the firm. In later posts I hope to touch on these issues in more detail.
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