Observations from the Russian market

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.