Blogbild_business in russia_(flickr_Mispahn)

On how to do business in Russia – The dos and don’ts in Putin’s Empire

Both international corporations and mid-sized companies show a growing interest in becoming active in Russia, the largest state in the world in terms of area. The economic situation in the Russian Federation is positive: The Russian economy had a perceptual growth of 4.3 per cent from 2010 to 2011. From 2012 to 2013 the growth was at 3.4 per cent and in 2013 it is expected to be 3.7 per cent.

One consequence of the generally good economic climate is an improvement in the standard of living. The average gross income per capita of $ 18,421 is lower than the OECD average of $ 32,949, yet Russians are very consumption-oriented: About 72 per cent of citizens spend all their disposable income. The consumer and luxury segments are booming industries. IT and lifestyle items are very much in demand and the car industry has the growing Russian market in its sights.

All in all Russia is becoming more and more predictable. The Russian government is planning to invest over 1 trillion Euros in modernisation by 2030. Structural improvements like joining the World Trade Organisation, an increase in anti-corruption measures and pushing forward privatisation are making Russia a more attractive market.

However, besides this positive development, the country between Russia and Asia still holds multiple challenges for foreign companies. Enterprises planning a step into the Russian market need to prepare economically but also need to understand the Russian mentality and the traditional code of conduct.

Since 2006 the SELLBYTEL Group has been active onsite in Moscow for international corporations. From the Russian capital, the SELLBYTEL outsourcing specialists take care of sales segments and service to business clients and customers of four leading IT and social media corporations.

Why was the leap into Russia so successful?

For strategy manager Markus Schöllmann it’s obvious: “If you want to open a branch in Russia, the management must be staffed accordingly. In other words: it must be managed by a Russian. Even though the legal situation in Russia is predictable and stable, the bureaucracy can be very complicated and there are big differences in the social cultural character of the business world. Thus it is advantageous to know the specific rules of the game, which locals know better than foreigners. An example: While in Germany it is enough to get along with your business partners on a technical level, meaning that you behave well, reliably and in a friendly manner towards your counterpart, that’s not enough in Russia by far. A manager who doesn’t take the typically Russian code of conduct into consideration has already lost.”

Baldur Dürrwang, Chairman of the SELLBYTEL Group daughter LIVINGBRANDS, also confirms the specifics of the Russian market. The sales expert lived in Moscow for over a year and spent over a decade working as a sales executive for several international corporations. “A knowledge of Russian history helps to understand how Russian society and businesses tick. Russia is a country of relationships. That’s how it has always been and even though there is a solid constitutional state now, these old structures are still in place. Communication is different too: Germans tend to speak very plainly, Russians are far more diplomatic. Everybody should get a chance to save face. Besides this, the motto ‘you scratch my back and I’ll scratch yours’ is very much alive. You have to be careful not to forget anyone. It’s not enough to be formally correct,” explains Dürrwang. “It’s also important to know that the rules in Moscow are different to those in other Russian cities or even in rural areas,” he adds.

Currently only locals are employed at the Moscow branch of the SELLBYTEL Group. Through our longstanding expertise we know where and how to find the right people. Our Russian managers are experienced and highly qualified. They have very good language skills, have international experience and know the rules of their home country very well. So far we have been very successful with this strategy. I would suggest every company call on expert advice before planning to start a business in Russia,” says Dürrwang.

“By taking into account some basic rules, a market expansion to Russia is very promising,” adds Markus Schöllmann. “We actually have very few problems on the ground. We offer opportunities for our staff to develop, that’s very important to the Russians. Our pay is very attractive by Russian standards; therefore we have a low rate of staff turnover and qualified employees. We adapt to Russian circumstances wherever possible to best meet our clients’ requirements. Ultimately you have to get involved with the Russian soul– then your business in Russia will succeed,” says Markus Schöllmann.

Please get back to Baldur Dürrwang and Markus Schöllmann with questions or comments via baldur.duerrwang@sellbytel.de or markus.schoellmann@sellbytel.de.

To be continued soon.

Picture: flickr/Mispahn
Text: Iris Röder

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