ACCESS Russia A Guide to doing business in Russia - Enterprise Ireland
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Table of Contents
1. INTRODUCTION ..................................................................................... 3
PURPOSE OF THE REPORT ......................................................................................................... 3
HOW IT WAS COMPILED .......................................................................................................... 4
2. CRITICAL SUCCESS FACTORS ................................................................. 5
INTRODUCTION...................................................................................................................... 5
WHY THIS MARKET IS IMPORTANT .............................................................................................. 5
BUSINESS CULTURE................................................................................................................. 5
ADVICE FROM SUCCESSFUL EXPORTERS ....................................................................................... 8
3. STARTING IN THE RUSSIAN MARKET ................................................... 15
INTRODUCTION.................................................................................................................... 15
GEOGRAPHY ....................................................................................................................... 15
CLARIFYING YOUR VALUE PROPOSITION ..................................................................................... 16
KNOWING YOUR COMPETITION ............................................................................................... 17
KNOWING YOUR CUSTOMERS ................................................................................................. 17
MAXIMISING YOUR RESOURCES ............................................................................................... 17
FINANCIAL RESOURCES ......................................................................................................... 18
HUMAN RESOURCES............................................................................................................. 18
DEVELOPING YOUR MARKETING STRATEGY ................................................................................. 18
COMMUNICATING YOUR BUSINESS PROPOSITION ......................................................................... 19
PRESENTATIONS .................................................................................................................. 19
4. ROUTES TO MARKET ............................................................................ 21
INTRODUCTION.................................................................................................................... 21
DIRECT EXPORT FROM IRELAND .............................................................................................. 21
WORKING WITH PARTNERS ..................................................................................................... 22
THIRD-PARTY DISTRIBUTION .................................................................................................... 22
MERGERS AND ACQUISITIONS ................................................................................................. 24
5. LEGAL ISSUES IN RUSSIA ..................................................................... 25
INTRODUCTION.................................................................................................................... 25
SETTING UP A BUSINESS......................................................................................................... 26
REGULATIONS FOR IMPORTERS ................................................................................................ 27
TAX .................................................................................................................................. 28
EXCHANGE CONTROLS .......................................................................................................... 28
IMMIGRATION/VISA .............................................................................................................. 29
6. GROWTH SECTORS .............................................................................. 30
INTRODUCTION.................................................................................................................... 30
ICT/HIGH TECHNOLOGY ......................................................................................................... 30
TRANSPORT AND AVIATION .................................................................................................... 31
CONSTRUCTION AND SUSTAINABILITY........................................................................................ 31
HEALTHCARE AND PHARMACEUTICALS ...................................................................................... 32
7. SELLING TO THE GOVERNMENT IN RUSSIA ......................................... 33
INTRODUCTION.................................................................................................................... 33
FRAMEWORK ...................................................................................................................... 33
PROCUREMENT.................................................................................................................... 33
8. HOW ENTERPRISE IRELAND CAN HELP YOU SUCCEED IN RUSSIA ....... 35
PRE-VISIT SUPPORT .............................................................................................................. 35
IN-MARKET SUPPORT ........................................................................................................... 35
1ACCESS TO EXTERNAL EXPERTISE AND ADVICE............................................................................ 36
MINISTERIAL EVENTS ............................................................................................................ 36
FINANCIAL ASSISTANCE ......................................................................................................... 36
CONTACTS IN RUSSIA ........................................................................................................... 37
DIPLOMATIC AND CONSULAR INFORMATION FOR RUSSIA .............................................................. 37
DISCLAIMER .................................................................................................................... 38
ACKNOWLEDGEMENTS .......................................................................................................... 39
21. Introduction
“ Ireland is a very important partner for Russia. Russian people
have a perspective on life that is similar to ours… Maybe Irish
people have an advantage because we know how to mix business
with friendship – it’s not just a functional relationship. That being
said, taking your time matters in Russia: it leads to relationships of
”
real trust.
Philip McDonagh, Irish Ambassador to Russia
In just over two decades since the fall of Communism, Russia has been shifting towards a
more open market economy that welcomes foreign trade. It is a global superpower – Russia
is one of the G8 nations and the eleventh largest global economy with a population of
almost 143 million people. Home to 12 major cities each with populations of more than a
million people, it is a growing consumer market with spending among a burgeoning middle
class in particular set to continue rising. In 2011, Russian GDP grew by 4.2 per cent and
growth for 2012 is forecast at close to 3.6 per cent. After years of negotiations, Russia’s
application for membership of the World Trade Organisation was finally accepted in 2011.
Purpose of the report
The objective of Access: Russia is to give practical and up-to-date information on the
market for Irish companies. Here, you will find useful, easy-to-digest advice on the critical
aspects of doing business in Russia for companies at all levels in their business development
within the country.
This guide covers:
• How to get started for early-stage exporters
• The business culture and how it differs from Ireland
• Routes to market, including selling directly, partnering with local providers, and
setting up
• Key legal issues, tax and visa considerations
• How to sell to the Government.
3How it was compiled
This report is based on the practical experience and knowledge of successful people in the
market, including members of the Global Irish Network, as well as by specialists in areas
such as business culture, legal issues and marketing. It is informed by the lessons learned by
the many Irish business executives who have succeeded in the Russian market. The report
also includes direct commentary from a number of these people.
42. Critical Success Factors
“ We’ve found the Russian market is outward looking, especially to
best-of-breed products that come from outside the country. It’s not going
to be an emerging market for ever, so you have to go in there sooner
”
rather than later.
Declan McGuinness, Senior Vice President of Sales, OpenJaw
Introduction
Having shielded itself from much of the world until just over 20 years ago, many
misconceptions remain about Russia. In reality, it has a largely European style of doing
business. Russian people can be reserved during initial meetings but once you get past that,
there are enormous similarities between Irish and Russian cultures.
Language apart, the fundamentals of doing business there are not so different to anywhere
else: Russians like to do business with people they trust and with whom they have built up
good personal relationships. Russians generally appreciate foreign businesspeople taking
the time to visit their country in person – this is especially the case outside Moscow. As a
market it may be better suited to mature companies rather than early-stage start-ups, since
it requires significant time and resources. Your best chances of success are in person-to-
person communications; e-mail or cold calling will not give the necessary levels of access to
decision makers.
Why this market is important
Russia is the closest of the BRICS [Brazil, Russia, India, China, South Africa] economies to
Ireland geographically and it has many infrastructural advantages over other emerging
markets. It has also recovered from the financial crisis faster than many other countries. As
recently as December 2011 it was outperforming established European economies and
many market observers still consider it as Europe’s strongest market.
Russia is the 11th largest global market for Irish companies. Annual trade between the two
nations has been estimated at close to €2 billion, rising by more than 30 per cent in 2011.
At present there are close to 120 Irish companies already doing business there.
Moscow is the obvious port of call for most Irish companies evaluating the Russian market.
For the first-time business visitor, the capital has a palpable buzz and displays visible signs
of a growing market driven by rising incomes and continued consumer spending. More
broadly, Russian consumers are becoming more discerning and now seek value; exporters
to the market need to pitch their wares accordingly. In 2012, the sense is that strong
brands and compelling offers will be needed to be successful.
Business culture
• Russians place a lot of emphasis on traditional values: conformity, unity, trust and
respect
5• Initial meetings are all about establishing a rapport and gauging mutual trust
• Greet your opposite number with a firm handshake while making eye contact
• Do not shake hands across the threshold of a door – it’s considered bad luck
• Print double-sided business cards, with Russian on one side and English details on
the other
• Present the Russian side of your card to your host when you greet them
• Be on time for meetings; in Russia, punctuality is greatly respected and it will be
noted that you arrived early
• Conversely, you may be kept waiting for some time but it’s important to show
patience
• The early stages of a meeting in Russia may be halting and slow; accept this and
continue with your presentation. Once the ice is broken in a meeting you will find
there is a lot in common with Irish people
• English is spoken in some business circles, particularly among younger managers,
but it’s good practice to bring an interpreter to meetings, particularly if you will be
dealing with senior executives who may only speak Russian
• When making a presentation, it’s a good idea at the outset to include some general
information about Ireland. Many Russians won’t be familiar with the country and
this helps to put your product and your company into context
• Use positive language when describing Ireland – if possible, include information or
statistics showing achievements or awards that are relevant to the work you will be
doing in Russia
• Get to the point: don’t drain the attention of your Russian prospect – hone your
pitch, practice it and make it brief so you can move on with the discussion
• Russians can be blunt at times and will tell you straight out if they think your offer
won’t work
• Invest time – plenty of it – in doing the preparation work before visiting in person
• Prepare in advance by having any marketing materials you plan to distribute
translated into Russian – it’s viewed as a sign of seriousness and commitment to
the market
• Make sure any translated materials have been proofread by a Russian speaker
beforehand
• Russians only recognise documents that have a corporate stamp; get one made if
you are serious about doing business in Russia
• Find out about your counterpart and know about his business well in advance
• In Russia, the culture is to respect any verbal commitments that are made
• Russian business operates on a hierarchical basis – you may have to go through
several layers of an organisation before reaching the key decision maker
6• Courtesy and formality counts in Russia; don’t exhibit superiority – Russians have a
high level of education and won’t welcome being talked down to by a Westerner
• Russian people tend to remember other people’s birthdays
• Bring a thoughtful gift, even if only something small and symbolic, as this would be
expected. It could be a book, or a DVD of the all-Ireland final or Riverdance, or a
bottle of Irish whiskey. Do not present it at the start of the meeting, as it might be
mistaken for seeking favours
• Send thank-you letters in hard copy format after the meeting
• Russians tend to take holidays early in the New Year (the Russian Orthodox
Christmas is 7 January)
• Early May is also best avoided for business trips; national holidays falling on the 1
and 9 May are often combined for a break from the office
• Late in the year prior to mid-December is often when budgets are spent, so that can
be a good time to arrange a business trip.
NEED TO KNOW
Corruption remains a significant issue in Russia and it’s very important to be aware of this. Irish
experience differs: some companies say they have never encountered it, whereas others have
expressed frustration at practices that can add to the cost of doing business in the country.
Some of the corruption is an undoubted reaction to high levels of bureaucracy in the country,
where payments are sometimes sought to expedite administrative processes. Russia is taking
steps to address the problem. The 2011 Corruption Perception Index compiled by Transparency
International, which measures public sector corruption, saw Russia’s ranking improve to 143
out of 182 countries – its highest level since 2007. What’s more, some observers say such
practices usually involve public officials; Irish SMEs selling to businesses are unlikely to be
confronted with these obstacles. The best advice from numerous sources is that, if an offer for a
bribe is made, you should rebuff any suggestions immediately. Have a stock answer prepared in
case – you might say that you can’t justify such payments to your company’s board or
shareholders, or simply look to change the agenda and find another way to resolve any impasse
legitimately. There are examples of Irish companies in Russia that gained a reputation for not
giving in to making payments, and after a while the questions stopped being asked.
NEED TO KNOW
Russian businesses have a very hierarchical structure and for that reason you should aim to talk
to the top people in the company who can make a final decision. You will probably have to go
through several meetings with that person’s staff before you make that breakthrough.
Muscovites appreciate businesspeople who take them time to visit the country and meet them;
that feeling is even more acute in some of the more remote regions, so it’s worth looking
beyond the obvious business centres if your product has a niche. In Russia, titles are important:
Sales Director makes more of an impression than Sales Manager on a business card. Director,
General Director, or President are all good titles if you can use them, while more general titles
like Consultant are not advised.
7Advice from successful exporters
There are many Irish companies who are successful exporters to Russia and that number is
growing. Here are some of their stories.
Here are their responses:
OpenJaw technologies, Declan McGuinness, Senior Vice President of Sales
OpenJaw Technologies allows travel companies to provide seamless online shopping
experiences for their customers. The company has been active in the Russian market since
2006 and has signed significant deals with S7 and Amargo.ru. It operates in the market
through an exclusive partner who represents the company there.
“
Our initial engagement with the Russian market was back in 2006 and was actually
opportunistic – a prospective customer contacted us based on an interest in next-
generation travel technology, liked what they saw and contracted us, and through that we
realised it was a market we should investigate in more depth. There were airlines emerging
such as S7 and Transaero, looking to bring something new to the market. Internet and e-
commerce systems were at the early stages of adoption. We felt there was an opportunity
to grow the market for online retailing systems, in the online travel and airline market in
particular.
We started discussions with S7 back in 2008 which ultimately led to a contract signed in
2011 which went live in early 2012. That’s how long the market has taken to catch up, let’s
say, and S7 are very early adopters in the market in allowing the consumer to do an end-to-
end journey online for all travel products. OpenJaw has also provided the insurance, car,
hotel booking facility for the S7.ru website. We also supply Amargo.ru, the online travel
website, with our travel retailing platform.
We decided to seek a local partner, and looked for somebody who had a strong connection
with the airlines and travel industry in Russia and we appointed them as a representative
for OpenJaw’s products and services in the Russian market. That took place in 2009 and the
appointed representative helped accelerate the relationship with S7 – they had actually
worked there and knew the organisation. Identifying a person that has that network in the
vertical market you’re targeting is very important, because relationship building is the
cornerstone of doing business in Russia. Our representative Sergei is exclusive to OpenJaw,
he has a modest retainer and then gets paid based on closing contracts that he is involved
with. Essentially Dublin handles most of the selling; our representative facilitates the
meetings and negotiations in Russia.
We took some time to qualify him, did background checks, and talked to people he had
worked with. To be honest, it was the right decision: he’s a great representative for us. He
knows the market intimately and is helping us develop our presence there. It’s about having
someone on the ground who can listen and facilitate you getting into the conversation.
Enterprise Ireland also supported us in terms of our attendance at aviation and travel-
related events and we’ve also participated in their successful trade missions to the Russian
market ourselves. Enterprise Ireland has been really supportive in terms of providing on-the-
ground advice, access to facilitators and even scheduling meetings and travel itineraries, all
in all taking some of the heavy lifting away. We have a strong relationship with the EI Team
in Moscow who also made the Irish Embassy open to us so we could invite prospects and
current customers – that goes down really well in Russia.
8There are certain national characteristics that are quite similar between Irish and Russian
people. There’s a dark sense of humour, they understand the hardship of living remotely –
especially when the weather is bad – and they generally enjoy socialising. The relationship
can develop from the business engagement to the social engagement. I know people there
who have become friends as well business colleagues. Culturally, it’s a very interesting place
to visit. It’s one of the places I enjoy going to. Moscow is a fantastic city. It reminds me of
New York in terms of the hustle and bustle and energy. However it’s eye-wateringly
expensive. If you’re going there, have your agenda worked out in advance.
Initially we learned by doing. We had secured a client by the time we had the
representation. I don’t think there’s so much of a language barrier in the travel space,
because a lot of the people involved in ecommerce are very well educated and it’s a young
industry. This is an emerging market, people are technically savvy – they’re adopting the
position that Western companies would have adopted previously and adding their deep
local insight. It’s a very, very active market and we see a lot of opportunities. We’ve found
the Russian market is outward looking, especially to best-of-breed products that come from
outside the country. It’s not going to be an emerging market for ever, so you have to go in
”
there sooner rather than later.
9O’Connor Sutton Cronin, John Mark Clancy, General Director & Managing
Partner
O’Connor Sutton Cronin is a firm of multidisciplinary consulting engineers, focusing on
structural, civil, mechanical and electrical engineering design and supervision services. It
established a Moscow office in 2008 which now employs more than 20 people.
“
We set up the engineering design company in Moscow to be financially trading
independently as a limited liability company (LLC), but part of the O’Connor Sutton Cronin
family of companies which operates in Ireland, the UK and other parts of Europe, Middle
East and North Africa. We now employ more than 20 people in our Moscow office and we
subcontract work back to the Irish and Polish companies within in the group, and we have
people travelling back and forth between offices respective to project needs. In the Moscow
office we employ Irish and Russian people and we also employ some Polish people who
have learned Russian. Our Russian staff is fluent in English and those Russians who joined
who didn’t originally have English now do. In any case, engineering is a language all of its
own: when you’re coming out here on short-term contracts, you don’t necessarily need to
speak it.
Obviously, you’re limited in what you can do as a foreign company. Your network base is
much bigger in Ireland, but once a company in Russia is looking for a company like us, the
Irish are seen as having a positive attitude, being enthusiastic and technically good.
In the beginning, you are literally knocking on doors. I didn’t come here expecting doors to
open. You have to generate your own luck by working hard and not giving up. Then you
reach a tipping point where you decide to go or grow. For us, that was in the winter of
2009 and the beginning of 2010. We had been here a year and a half by that point. It
meant getting a larger office in the city centre, increasing staff and equipment and that
brought more overheads, but once you grow a bit, you are seen as more viable and clients
pay you much more respect and attention.
The first project we did was for a major fashion outlet that was 40,000 sq m – in scale,
that’s ten times the size of the Kildare Village outlet. It was the first outlet store of its kind
in Moscow and it was a large project that went on for a couple of years. We completed a
project with Ikea in 2010. That certainly gave us a reasonable lift. Now we’re working on a
number of industrial developments, factories, retail schemes, city centre renovations,
logistics parks and residential and mixed-use offices in a range of locations.
It is a tough environment. Each of those projects brought their own challenges such as local
building codes. There is a lot of paperwork and administration to be done but having to do
that sometimes means you are more in touch with the bottom line of your business. As
manager, you have to sign off on purchasing, for example; people in your company can’t
just spend.
Things are much more on a contract basis than at home. You don’t start work until you
have a contract in place and payment upfront. Your only lever in getting work done is
payments. Then you’ll get the decision you need from clients.
In Russian organisations, I’ve found there is more direct management and it’s more
hierarchical. The managing director might invite the whole office to the meeting to make
them aware of a project.
Everyone wants everything tomorrow but often things aren’t thought through and really
it’s going to take nine months. A lot of times, there’s not a realistic admission of time
needed. That can lead to a frustrating programme of works and you could be halfway
10through when you have to go back to the start. However, these are understandable
challenges and issues to be faced in a developing market and construction industry.
If you are going to do business in Russia, don’t think that developing a flashy brochure or
finding a local partner is all you have to do. You must do the work yourself, or find
someone in your organisation with a passion and loyalty to your brand and who will work
every day for your brand in Russia. If you don’t build it from the top down, using the ethos
of how you built your original company in Ireland, you won’t have tried and you won’t
succeed.
There’s a lot of administration you have to be prepared for – it’s an overhead but you
shouldn’t see it as a mountain; you have to pay your taxes, your social contributions and
your VAT. Do everything officially as if you were at home in Ireland. Don’t take the advice of
people who tell you they know how you can reduce your taxes. If you don’t follow the
regulations, you will be taken to task. My advice would be, do things right.
It can be a challenging place to live, based on the cultural differences, the language, the
legacy of Soviet times and the climate. But – if you have a drive and a passion to get on
”
with your business, those issues won’t cause you to fail.
Marco Beverage Systems, Brian English, European Sales Director
Marco Beverage Systems designs and manufactures water boilers and filter coffee systems.
It supplies some of the leading coffee house chains in Moscow and has established a
dedicated distributor, Marko Rustin, specifically to supply the Russian market.
“
We design and manufacture water boilers and filter coffee brewers. There’s a big coffee
culture in Russia. We supply a chain of coffee houses in Moscow. There are also many small
shops, cafes and restaurants that have bought our equipment, and we supply Alephtrade,
the Russian distributor of Althaus teas in Bremen with water boilers.
In the Russian market, my experience is that you have to invest a great deal of time. There’s
a lot of wealth there and there’s a lot of taste for consumer products, especially from
Western economies. We are tapping into an unmet need. The difference that we really
focus on is the quality of coffee that our equipment brews.
To anyone considering the market, I’d say make sure you know who you want to sell to.
You have to do the market research first to identify the customers; whether you sell directly
or through a channel is a secondary consideration. You also need to know who your
competitors are. Given our business is a specialist area, we did an extensive market map,
and we found out who all the significant players were in the tea and filter coffee market
were. We knew what the landscape of our market sector was in the major population
sectors – in Moscow, and St Petersburg and Novosibirsk, which has an intensive coffee
culture.
We have a Russian employee who does this research for us. There’s no substitute for it: you
need somebody who understands the market, who can talk to people and find out what
you need to know … it’s about being resourceful and having someone to get the
information you need.
Our strategy is to have a very strong presence in the coffee space. We have the 2010 world
number 2 cupping champion on our books, and we support the brewers’ cup events in
various countries. That gives us a lot of visibility among the coffee community. We trained
11some baristas of our Russian customers in Milan on our stand in the host exhibition. They
love the exposure to expertise in coffee brewing.
Our business plan has us doubling our business in Russia every year for the next three years.
We are anchoring a lot our growth with the dedicated distributor we set up, Marko Rustin.
I met 10 or 12 potential partners that Marco had been talking to before I joined … we
considered our best option for the Russian market was to establish a specialist equipment
distributor where the people were very committed to the concept of good filter coffee.
However, that process took eight or nine months.
I find the people are warm and friendly at an individual level doing business. They are very
honourable, and they’re not out in business to rip you off. When they say something, their
word is their bond. They seem to feel complimented that you’ve come to visit them and
their country,
That being said, I’d also say temper your expectations. The ramp up is going to be very
much slower that you might be used to, and you’re going to deal with bureaucracy. That’s
the frustration and you’ve just got to get through it. You have to go through a very
dogmatic process sometimes. Also, the process of finding a partner – and you do need a
partner – is slow and laborious. Some of the procedures and the bureaucracy are very
frustrating and it can be an extremely difficult place to do business: you’ve got to be robust
”
and streetwise.
Brandtone, Donald Fitzmaurice, CEO
Mobile engagement specialist Brandtone works with global FMCG brands to expand their
market share in key developing and emerging markets. Already operating in South Africa,
Brazil and Turkey, the company is evaluating the possibility of setting up in Russia although
it has not yet formally taken the decision to do so.
“
In a typical campaign, we put secure codes inside a customer’s product. On the outside, the
packet will say ‘buy me and get a free phone credit’. As part of redeeming the reward, we
profile the customer by asking them a few questions. We increase our customer’s volume of
sales by incentivising the sale but we also create a database of millions of profiled
consumers. From these profiles we understand what consumer behaviours are driving
volume, and engage with individual consumers directly in a highly targeted way, with the
ultimate objective of converting volume increases to share increases in these key markets.
We design a campaign for our customers, and that requires a local team with local
knowledge, complemented by a team in Dublin. We do the technology, the data and the
telecoms for each of the markets. Our local teams are essentially a marketing team. In each
of the markets we enter, we try to understand if there is demand for our product from our
client and if the demand is of sufficient magnitude for us to make a profit.
On the legal and tax side of things, our CFO and his team work with PwC in Dublin and its
local office in-country; together we design a structure that is compliant and tax-efficient.
We typically also retain a local lawyer and a local accountancy firm. In terms of Russia,
we’re halfway through that process.
It’s fair to say that, to date, we haven’t encountered challenges that are particularly unique
to the Russian market. Getting the right people and getting a very engaged first customer:
that’s the same challenge everywhere. Most of our customers are global multinationals.
They do business in English and operate similar business processes in all countries. There are
some cultural differences, and as we become more deeply engaged in a market, we expect
12to become aware of ways in which we will have to do business that is specific to that
market – and that’s why we have a local team.
Even though we haven’t formally taken a decision to enter the Russian market, I would say
we’ve taken more than 10 trips. You need to spend a lot of time there doing the work and
understanding the market. We’ve learned a lot but we know there is a lot more we have to
learn. You prepare as carefully as you can, but in the end, you have to roll up your sleeves,
go over there and get stuck in.
If we make the decision to enter this market, I would imagine will have someone from
senior management there every week, if not more than one person. Then, as time goes on,
we would hand over the running of the company to the general manager and the team as
it builds up.
The education system appears to be very good in Russia. They produce very well-educated
young professionals who, to me, seem very motivated but are maybe a little more cautious
in terms of their professional decisions. What we are finding in the recruitment phase was
that, we had to take a lot of time to establish our credentials with prospective recruits. As
opposed to meeting people in South Africa once or twice, we would probably need to meet
them in Russia three or four times. The first two times are for them to get to know us. The
recruitment process will need to be invested in, and that’s something I didn’t know before.
For an Irish company that doesn’t have a significant network there, using an international
headhunting firm that has a deep network in the market is very important. Something we
knew on paper but we only started to realise the true importance of when we went there,
is how big the country is geographically and how culturally diverse it is. For anything that
involves distribution, it’s both a huge opportunity and a huge challenge. In Russia, you have
”
developed, developing and emerging market characteristics all in one country.
EC3 design, Sean Harrington, Director
EC3 Design is a joint venture between two architecture practices and a sustainable design
consultancy which together are focused on making sustainable buildings. In particular they
have done considerable research into retro-fitting apartment buildings from the post-war
period in CIS countries to minimise their energy consumption. Formed in 2011, two of the
group’s directors made their first fact-finding visit to Moscow with Enterprise Ireland in
April 2012.
“
We founded a new company specifically to target Russia and the CIS. From early discussions
with Enterprise Ireland, we knew that potentially there was a market there and we had
experience and knowledge that we can sell. It’s important to find a market where you know
you’re going to be in demand. We did a pilot project in advance of going, like a research
project, and we put about 200 person-hours into it.
With tremendous follow-on assistance and brilliant advice from Enterprise Ireland in
Moscow, we then put together a very clear list of people we intended to meet which they
then organised for us. All told, it took 18 months to prepare, including forming the new
company. Going to Russia is expensive, not just in the time away from the office. If we had
gone a year ago, I don’t think the market would have been ready. Now, we feel our timing
is good and the people we met there agreed.
You must have a USP: you’ve got to find something that captures people’s attention. It’s
got to be a clear idea. We did a very image-based presentation that didn’t rely heavily on
language. We used a very refined, distilled amount of text. Every page had captions in
13English and Russian (with translation services provided by EI) so there was almost a
storyboard of the project idea. We took illustrations of our work – you reassure people that
you’ve done it before and it shows someone else has trusted you with their money.
The idea behind using an iPad for our presentation is that clients like putting their fingers
on it and changing the presentation themselves. How you present something is important.
We also used good old paper; we took 15 A4 bound reports, and bi-lingual business cards.
People love taking away something, and electronic presentations only leave the memory.
Plus, it was very cost-effective.
The primary purpose of our visit was to test the market so that when we go back again, we
have built a platform from which we can strike further. We are still liaising with Enterprise
Ireland in Moscow, and also setting up follow-up meetings, and they continue to be very
proactive and helpful. It’s a case of having 10 fishing lines in the water and waiting for a
bite. We’ve got three or four very good leads that we’re following up.
Having come back, I realise how tiring it is to be there. When you’re there you need to be
totally alert and listening and looking at what people are saying and why they’re saying it.
You’re trying to understand how they’re thinking. My overall impression was very positive.
It’s concentrated communicating, but I enjoyed it. I think the Irish people have a
tremendous advantage in Russia because it’s a similar friendship-based business culture. I
would say: be patient and enjoy the process of making friends.
Moscow has awe-inspiring scale. It’s wonderful to travel around by Metro and disastrous to
travel by car. The goal directs you, you’re not sure where the work is going to come from,
but you have a good idea of the general areas. You go to make people aware of what you
do. We also realise who is not interested in us – and that’s important: to find out what your
market isn’t.
In Russia, we met potential clients, people who could partner with us and other consultants
we might work with should we be successful. We met researchers to find out more subject
matter information. We met with lawyers to look at possible contracts and we met the Irish
Ambassador to Russia. We came back with 30 to 40 business cards. The networking in a
three-day period was absolutely immense.
The whole idea of partnerships with Russians is very interesting for us. They offer the ability
to open doors, set up other meetings or advise us on cultural or business issues, such as
awareness of Russian building regulations. It’s important to know there is a phenomenal
amount of bureaucracy. It’s a kind of a self-sustaining industry. You need somebody on the
”
ground to assist you, so you should plan for it.
14ST
ARTI
NGI
NTHERUSSI
ANMARKET3. Starting in the Russian market
“ There are plenty of examples of very successful foreign
businesses in Russia, and some happen to be Irish. Mostly, it’s a long
”
game. But, if you’ve got perseverance you can do very well.
John Goodwin, Managing Partner, Linklaters Moscow
Introduction
You will need to spend a lot of time researching thoroughly in order to understand the
similarities and differences between this and other markets. Nothing will undermine your
credibility to a Russian prospect faster than a poorly prepared pitch that shows little insight
on where your company can fit in and provide value for customers that they can’t get
elsewhere.
Geography
At a remove, it can be difficult to convey just how large the Russian market is in
geographical terms. The country occupies one eighth of the Earth’s total landmass,
spanning nine time zones. That makes it essential to plan where you envisage your main
market will be. For most Irish companies, Moscow is the obvious place to start. With an
official population of more than 11 million (unofficial figures suggest it may even be as
high as 17 million), the Russian capital is also a significant market in its own right and it’s
likely you will first need to become established there before expanding your presence
elsewhere in the country.
Moscow is far closer to Ireland than many people realise – less than 3,000km. Currently, the
only direct flights between Dublin and Moscow are operated on a seasonal basis by the S7
airline. Let the length of trip be dictated by where you have to go – three or four days is
probably enough if you only intend to stay in Moscow but if you have to travel outside the
city, allow for sufficient time to get there and back. Transportation links are not as well
developed outside the main urban centres, so if your business trip is likely to involve travel
beyond the obvious locations, adapt your plans accordingly.
There are more than 12 cities in Russia with populations of over a million people. St
Petersburg is the next largest city after Moscow, with almost five million people living there.
As a port city, it is a significant trade gateway and is a hub for sectors including
shipbuilding, aerospace, electronics, software and pharmaceuticals. It’s also arguably the
most Westernised Russian city. Kazan has been designated as Russia’s third city and is a
major financial and industrial hub in its region; it is home to several industries including
petrochemicals, mechanical engineering and food. Other prominent Russian cities include
Novosibirsk, Yekaterinburg, Nizhny Novgorod, Samara and Omsk. Keeping in touch with the
market remotely offers several challenges. Moscow, St Petersburg and Kazan are all three
hours ahead of Ireland; Yekaterinburg is five hours ahead.
15Clarifying your value proposition
Understanding where you are positioned in the market and having a consistent message
about your company, whether it is towards existing or potential clients, employees,
investors or the public at large, is critical in building recognition and credibility.
Russia is a vast market, so rather than taking a scattergun approach, focus on a vertical
market you want to enter and identify possible opportunities in it based on where and to
whom you can offer value. See what your competition is doing in the same market and
assess what your strengths and weaknesses are.
Why should a prospect buy from you over the competition? What makes your offering
superior? What is the unique selling point? Your business must have a value proposition to
separate you from the competition. This may seem basic but it is essential that you can
communicate succinctly how you can create value for a customer. Pay particular attention
to framing your proposition in a Russian-centric way.
• Frame your proposition in terms that show you understand the customer’s
problem, as opposed to just selling them your product
• Look to provide a solution to your clients’ pain point that they cannot get
elsewhere
• Can your USP be stated simply? This is especially important when meeting senior
decision makers where you may not have time for a detailed presentation
• Your offer should be able to be communicated verbally and visually
• USPs need not relate purely to products; subject matter expertise also counts
• Your product must stand out – what will make a Russian partner work with you if
he can get a better or cheaper product somewhere else?
• Differentiate on professional service, better support services and more innovative
products
16• If you sell physical products, you will almost certainly need a distributor – and
possibly more than one – because the Russian market is so vast in geographical
terms
• If possible, you should look to get a distributor that is not also selling a
competitor’s product, as it can be very hard to control sales situations where your
offer won’t necessarily be the most attractive.
NEED TO KNOW
In a bid to diversify its economy from reliance on natural resources, the Russian Government
launched its ‘modernisation’ policy platform in 2009. An Irish company will help its prospects by
using this term when framing its proposition, as it will resonate strongly with Russian buyers.
Avoid talking about your product or service as the star performer: instead, presenting it as an
important component in the overall system of providing an innovative economic solution means it
will stand a better chance of being favourably received.
Knowing your competition
• Who are your rivals in the market and how do their offerings compare with and
differ from yours?
• Is the market dominated by a few strong players or fragmented with many small
competitors?
Knowing your customers
• What is your target market?
• Who are the relevant decision-makers – their titles and responsibilities?
If there is an obvious gap in the market, find out why. There are hundreds of examples of
where companies act to fill such gaps only to discover that they existed in the first place for
good reason.
Maximising your resources
Researching the Russian market for your product or service will get you so far but a certain
amount of intuitive decision-making is necessary when formulating your business
development strategy in a new market. The level of resources (both human and financial)
you are prepared to invest clarifies your level of commitment to the market and also may
create a ceiling on your possible success. If you are under-resourced from the start, it will be
difficult to win deals.
A useful approach may be to learn from the experiences of other Irish companies. More
experienced individuals and companies are generally willing to share their learning. Some
case studies are included with this guide, and Enterprise Ireland can make relevant
introductions for you if you are interested in exploring this further.
17Another point of contact is the Ireland Russia Business Association (www.irba.ie), a non-
profit group based in Dublin which aims to promote bilateral commerce between the two
nations. It runs events and business networks, along with a social network on LinkedIn. It
also facilitates experience sharing and provides academic lectures as well as business
briefings.
Financial Resources
If you start with a realistic sales forecast and work backwards, you should determine an
appropriate budget for your business development needs in Russia for the short and long
term. Create a P&L for the Russian SBU to monitor the resources used against target sales
achieved. You also need to think about where you will get these resources if you don’t have
a surplus in your current budget. Talk to other Irish companies already selling there; their
experience may guide you. Keep in mind Moscow is a very expensive city to visit and stay in;
factor this into your calculations and make sure your trips are well planned to make the
most of your time there.
The long-term aim will be to establish a successful operation in one or more of the markets
there. Deals struck over the short term tend to be the exception, and you should temper
your expectations. It could be up to two years before you start to generate revenue in the
market. Making a plan from the outset dividing your short-term (1 year), medium-term (1-3
years) and longer-term (5 years +) targets will enable you to plan for a fluctuating revenue
cycle.
Human Resources
It’s not necessary at the initial stages to create a permanent base in Russia, but frequent
travel is advised in order to build relationships and get a feel for the markets. In the longer
term, keep in mind that if you choose to base a member of your team on the ground in
Russia, this carries an additional cost, particularly as Russia is an expensive place to live. It’s
also likely to affect how they work with your head office; there is a three-hour time
difference between Moscow or St Petersburg and Ireland, and this gap increases the further
East you travel.
Developing your marketing strategy
Good ways for Irish companies to market themselves in Russia are to:
• Attend or exhibit at trade shows
• Avail of guest speaking spots
• Get an elevator pitch slot at a sector-specific networking event
• Sponsor events
• Use business-focused social media such as LinkedIn
• Use traditional media and the web, with localised content
• Undertake traditional PR activities
• Go on trade missions
18• Get involved with local business networks.
A good way to start formulating strategy is by reviewing the past year’s strategy and
performance. Some areas to look at include:
• What worked and what did not work?
• How did you generate your Irish sales and can you apply this technique in Russia?
• Which methods were the most profitable?
• How did people find you?
• What customer needs did you satisfy?
• What marketing efforts produced little or no results?
Enterprise Ireland can work with you on researching the most efficient and cost-effective
sales channels for your product or service. These options are dealt with in more detail in the
Routes to Market chapter of this guide.
Communicating your business proposition
As soon as you decide you want to enter the Russian market, you will need to adapt your
communications policy. Success in this new market will only happen if you can put across
to prospects what you can provide in any and all circumstances.
Presentations
The following may help you to prepare a presentation for the Russian market:
• Always customise the presentation for each prospect
• Consider including their company logo in your demo to show the fit between your
company and your client’s business
• Use short case studies to show where you have solved similar issues for other clients
• Translate any collateral you plan to hand out at the presentation
• Use the services of a reliable translator to adapt your presentation for a Russian
audience
• Keep your presentation short – under 10 minutes is advisable in Russia
• Make your presentation as visual as possible
• Keep the formal part of the presentation brief, backed up with points and graphics
• Emphasise the business case.
19NEED TO KNOW
In Russia, where language is a likely barrier, why subject your audience to a long PowerPoint
presentation? Where the circumstances allow, consider adapting your presentation so it can be
displayed on a touch-screen tablet computer such as an iPad. It makes your pitch more interactive,
helping to break the ice with your counterpart in the meeting. This approach is also likely to create
a good impression with a technically-savvy Russian. This approach will require you to think about
your presentation in a more visual way, rather than relying heavily on words that will need to be
translated.
Be aware that in meetings of more than six people, tablet devices are less practical and you should
also have a more traditional presentation prepared that can be displayed via projector. The
seniority of people in the room should also dictate the length of your pitch. As a rule, the higher
up in an organisation you go, the shorter the time you have to make your case.
204. Routes to Market
“ We do your homework: understand the structure of the
organisation you want to sell into. They key is to pitch yourself into a
”
level of the organisation that’s relevant to your business.
Tony Maher, former CEO, Wimm-Bill-Dann
Introduction
In this section we look at the options for serving the Russian market. Although distance and
logistics start to become a factor once you look beyond Moscow or St Petersburg for
business opportunities, arguably the single biggest barrier for many Irish SMEs is failing to
invest sufficient time. Becoming known and trusted in Russia takes time and this can’t be
underestimated: plan for it accordingly and allocate sufficient resources – both human and
financial – to make it work.
NEED TO KNOW
Use any downtime between meetings productively: get a feel for the market by walking around,
observing and learning about Russia while you are there. Visit shops, looking at what people are
doing, what they are buying and what they are wearing – the kind of primary research that can’t
be done from Ireland.
Direct export from Ireland
Moscow is one of the most affluent capitals in Europe, with prices to match. Fact-finding
visits to the Russian capital won’t be done cheaply. While return flights are competitive and
there are plenty of airlines serving Russia, the cost of hotels is expensive. Three-day business
trips are likely to cost at least €2,500. Let the length of your stay be dictated by where you
have to go – three days is probably enough if you will only be in Moscow but if you have to
travel outside the city, allow for sufficient time to get there and back.
Even if your time in Russia is short, don’t arrange seven or eight meetings a day. For
logistical reasons, veteran Moscow-based Irish businesspeople recommend arranging no
more than three or four meetings per day, spacing them sufficiently far apart to arrive on
time (since you as the visitor should always be prompt, even if you are then kept waiting).
NEED TO KNOW
The best way to get to meetings in Moscow is the metro because you will get there on time – even
during the cold seasons. Moscow’s metro system is entirely in Russian but it is relatively easy to
navigate. It operates on a hub-and-spoke system which is colour-coded and there is also a circle
line serving the centre. When approaching the city centre, stations are announced by name over
the PA system in a male voice and when the metro is travelling away from the centre, a female
voice can be heard. 21Working with partners
In Russia, the most commonly understood definition of a partner is a person who has a
committed and ideally exclusive arrangement to act as a facilitator for your company in the
market. If your product or service is aimed at Government agencies, you will need to work
with a local partner. Some Irish companies have also used them successfully in selling
business-to-business, although it is not strictly necessary to use them in all cases. There are
many advantages to working with a local entity; you immediately remove the language
barrier and you potentially tap into an established network of contacts that could help to
drive sales faster than if you were to go it alone. Many Irish businesses have worked
successfully with Russian partners, but you should always take the time to develop a trusted
relationship with any potential business partner.
When appointing a partner:
• Don’t rely on your impressions from one meeting
• Do your due diligence properly, know who you’re doing business with
• Conduct checks such as tax status and trading history
• Find out whether the partner can provide the levels of access to customers that
they claim
• Seek the advice of multinationals, locally-based professional services firms, or
Enterprise Ireland who may recommend a partner or facilitator for you
• Don’t sign any legal agreements, even if your initial feeling is good, until all checks
have been carried out
• Suggest a short-term engagement so you can more closely gauge the partner’s
effectiveness
• Be extremely clear when defining roles and responsibilities of each party
• Beware of using terms like ‘exclusive’ in contracts.
Third-party distribution
Whereas partners are useful in establishing contacts and facilitating introductions, a
distributor will hold stock of goods that you are supplying into the market and will provide
them to its own network of resellers. Signing with an agent or distributor in Russia is not
significantly more complex than other international business agreements. As with any legal
undertaking, you should get the advice of a locally-based law firm to vet what you are
doing. It’s also good practice to check that the distributor does not have other agreements
with similar companies in your sector as well, as this may have an impact on how effective
your sales presence is.
The key parts of the contract should have:
• a defined term
• a defined territory – especially important in a country as large as Russia
• a performance-related component (such as sales targets)
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