Doing Business in Russia, Volume II

Anatoly Zhuplev

• Publisher: Business Expert Press
• Year: 2016
• Print ISBN: 9781631576782
• eBook ISBN: 9781631576799
• Topic: Business
• Subtopic: International Business
• Index: Business

Russia is a major economy and important power in the global political-economic landscape. Following the dissolution of the USSR, Russia has become a premier global marketplace despite remaining enigmatic and challenging. The book serves as a concise guide in understanding Russia from an international business perspective. It explores strategic issues, drivers, constraints, costs, and risks of international expansion and includes analytical tools, practical applications, sources of information, and assistance in international business research. These are supplemented by analysis of Russia's macro-economic profile, drivers, strategic strengths and weaknesses in the comparative context, including its international market attractiveness and opportunities for U.S. companies. The book examines Russia's main industries, their profiles, trends and business attractiveness, trends, and marketing strategies. The discussion of Russia's regions covers regional subdivisions and economic profiles with the focus on Moscow, the leading economic region. The book also covers the drivers and trends of the Russian small business sector and entrepreneurial business venturing. Despite the onslaught of capitalism, Russia retains its relationship-driven culture. The book provides insights by evaluating the determinants of Russian culture, its national profile in major global cross-cultural studies, and practical cultural applications in business, negotiations, and communications. The book's pedagogy includes skill development exercises and cases on doing business in Russia.

CHAPTER 1

Russian Regions

Business Dynamics and Attractiveness

The best thing we can do if we want the Russians to let us be Americans is to let the Russians be Russian.

—George F. Kennan

US diplomat, historian, explorer, and war correspondent US Ambassador to the Soviet Union, May 14, 1952– September 19, 1952

Main Points in This Chapter

• Russia: Regional subdivisions and economic profiles.
• Business environment and investment climate in the City of Moscow: Domestic and international perspective.

Regional analysis is an integral part of business research or a feasibility study preceding the company’s international strategic expansion to the target country. Regional analysis is particularly important when it comes to large countries characterized by multifaceted demographics and complex politico-economic landscape.

For example, Japan is one of the world’s major markets and most ethnically homogenous countries.¹ From the distance of New York or Los Angeles, Japan may well seem just that—a large and very homogenous marketplace. However, two of Japan’s major metropolitan districts with the capitals of Tokyo and Osaka that are only 246 miles (396 km) apart, are quite different in their market dynamics, business practices, and strategic approaches. Variations in market dynamics require different approaches to formulating a company marketing mix, the 4Ps (Consumer Lifestyles in Japan 2016). Such variations in the marketing mix are also common in Belgium, a small, ethnically diverse European country with a population of 11.3 million that is 58 percent Fleming, 31 percent Walloon, and 11 percent mixed or other. Yet another example is Singapore, a small Asian country-city of just 5.7 million people. Despite its small geographic size,² Singapore is also ethnically diverse—74 percent Chinese, 13 percent Malay, 9 percent Indian, and 3 percent comprised of other ethnic groups (Central Intelligence Agency 2016). In large but ethnically homogenous countries such as Japan or small but demographically diverse countries such as Belgium and Singapore, there is an evident need for differentiation in marketing strategies and business practices. For a country as large and diverse as Russia, the needs for regional, ethnic, demographic, and other regional variations in marketing strategies and business approaches and practices tend to be even greater (Russia 2016; Russia: Country Profile 2016).

Russia’s Regional Subdivisions and Economic Profiles

Russia’s current governing-administrative system and regional subdivisions have come a long way, originating from the nation’s complex geography, history, political economy, sociocultural, and military developments (A Country Study: Russia 1998).

As of 2016, there were 85 federal administrative subjects that are constituent members of the Russian Federation.³ Russia’s federal subjects can be categorized into six types: 22 republics, 9 krais (large districts, plural—A.Z.), 46 oblasts, 3 federal cities, 1 autonomous oblast, and 4 autonomous okrugs (districts, plural—A.Z.) (Russian Investment Agency 2016) (Figure 1.1).

Figure 1.1 Federal subjects of Russia

Along with the federal subjects, Russian regional structure is comprised of 9 federal districts,⁴ 12 economic regions⁵ (Figure 1.2), 4 military districts,⁶ and a multitude of municipal divisions. Additionally, there are 29 special economic zones set up to facilitate foreign investment through tax breaks, insurance privileges, relaxed customs regime, ready-to-use infrastructure, and other incentives (Special Economic Zones of the Russian Federation 2011). Until recently, the regional governance and development on the federal level had been under the jurisdiction of the Ministry of Regional Development of Russia (Министерство регионального развития Российской Федерации—Минрегион России). In 2014, the Ministry of Regional Development was abolished and its responsibilities redistributed across other ministries. The task of facilitating foreign investments in Russia was assigned to the newly created federal Russian Investment (Invest in Russia) Agency (Российское инвестиционное агентство).⁷

Figure 1.2 Economic regions of Russia

As noted earlier, an international corporate business expansion to Russia or any other country is typically driven by either export-based international marketing or foreign direct investment–based manuf...

Table of contents

• Cover
• Title
• Copyright
• Acknowledgments
• Chapter 1. Russian Regions: Business Dynamics and Attractiveness
• Chapter 2. Small Business, Entrepreneurship, and Business Venturing in Russia
• Chapter 3. Russian Business Culture
• Appendix I: Information Sources on Doing Business in Russia
• Appendix II: Skill Development Exercises and Cases on Doing Business in Russia
• Index
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