Russia’s challenges: If you can’t stand the heat, stay out of the kitchen

“What makes Russia difficult or challenging?” It sounds like a negative question and in a sense, it is. But it is an important and necessary question because only when you soberly identify the challenges and problems can you start to address them. When you look at statistics and rankings then you can objectively state that Russia is a difficult place to live and work in. Whether they be statistics on SME development (Small and Medium Enterprises), demographics, rankings of quality of life, ratings on corruption, you won’t find Russia anywhere as a top performing country.

So what makes Russia more difficult than Singapore, Denmark or Norway? To answer this question, it suffices to look at the results of a survey done by the Russian Union for Industrialists and Entrepreneurs. The Survey asked 100 “Fortune 500” in Russia how the business climate had developed in 2018. 50% of the companies experienced a deterioration and 40% saw no change. The main challenges these companies indicated were: corruption 60%, staffing 40%, tax administration 40% and ineffective government 20%.  Other surveys point to challenges such as bureaucracy, the legal environment, state control over the economy, customs, banking and finance, currency volatility, geopolitics and sanctions. Based on my own experience I would add to this list of challenges that in Russia you never know what is going to happen next and nothing is guaranteed.

So, what to do about these challenges? You need to start by deciding if you want and need to do business on the Russian market. If the Russian market is important for your company, then make sure you prepare properly without making any assumptions. Preparation consists of acquiring the needed information, formulating a market strategy and defining a concrete action plan. You need to be ready to take and keep control of your business in Russia.

For any new business venture in Russia we usually start with asking ourselves the following 8 questions:

  1. Do we have a competitive product or service?
  2. Do we know the market?
  3. Are we hungry enough for the business?
  4. Are we ready to go local?
  5. Do we have a clear strategy?
  6. Can we dedicate enough resources?
  7. Do we have the right team?
  8. Are we capable and willing to take control?

You can start answering these questions by following the 6 do’s and don’ts below:

  1. Don’t underestimate Russia and don’t assume.
  2. Don’t waste time on desk research of the market but simply travel to Russia and start talking to market players and look at the market with your own eyes.
  3. Make sure you deal with the language barrier.
  4. Define your value proposition
  5. Check logistics, customs and certification and calculate your pricing model.
  6. Find the right people to work with.

And when in doubt, feel free to contact us. A quick meeting, skype, whatsapp or video call can bring some easy light in the darkness.

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