Transcript Presentation

Russia
Ryan Farmer
Terel Nichols
Marcus Van Deventer
Heather Jenkins
Duryan Durocher
Joseph Cross
History and Impact on Culture
•Integration of communism in
1912
•Widespread Atheism for 79
years
•Impact on culture:
–Polychromic – balance a lot at
once
–Collectivism – Rely on close-knit
ties
–Pragmatic – realistic and direct
Hofstede Culture Dimensions
Russia’s top 3 highest scores out the Geert Hofstede 6 demissions
1.Uncertainty Avoidance
2.Power Distance
3.Long Term Orientation
Negotiation Style and Tactics
Cultural Negotiation Values:
Tactical Approach:
•Value strong relationships;
require signs of sincere
interest
• Stay cool
•Typically quiet
•Show respect for Russia and
connect on personal level
•Lots of questions is not a
good sign
•Patience is highly valued
•Be sincere
•Watch your back
•Eye contact and business
cards
•Get agreements in writing
Marketing and Management Style:
Management:
Marketing:
–Focus on relationships; trust
is key
- Target Moscow; 66% of
investments go there
–Employees are typically
reserved and take instruction
well from one Boss
–Being formal and distant is
form of respect
–Hold meetings regularly to
monitor productivity
- Seek expansion
- Hire a culture coach
Governmental Structure
• Russia is a Federation
• The legislative branch is
similar to the United States
• Russia government places
significant power with local
and territorial government.
• Executive power is split
• Oppressed Freedoms and
Property Rights
• Russian government and
politics may limit economic
expansion
Index of Economic Freedom
The Index of Economic Freedom There are 10 categories that
measure a country, these are: Property Rights, Freedom of
Corruption, Government Spending, Fiscal Freedom, Business
Freedom, Monetary Freedom, Labor Freedom, Trade Freedom,
Investment Freedom, and Financial Freedom.
Index of Economic Freedom
Here is how Russia rates on the Index of Economic Freedom
compared to the United States, and the world average:
Conclusions from the Score
• Negative: No Property Rights and Minimal Investment Freedom.
• Positive: High Business Freedom and great Trade freedoms.
• Cautions:
• Strict and oppressing rules and policies.
• Potential for assets being controlled by government
Most Favored Nation (MFN)
Russia offers MFN status to:
• All former Soviet States, China, Japan, North Korea, Italy
• Most Favored Nations Tariff is; 8.4% in 2014
Other trade barriers;
Russia imposes Excise tax, Value tax and Tariffs on products.
Conclusion;
Russian government cannot restrict our business with high tariffs
because of membership in WTO.
FDI Restrictions
• Annexed Crimea
• Ban imports of food product to several countries
• Screening of activities for companies wanting foreign
investment
• Regulates investment on foreign firms in strategic sectors
Incentives established to attract
Foreign Investments
• The U.S overseas Private Investment Corporation (OPIC)
• Building some “32 Special Economic Zones or SEZ”
• Save investor cost of up to 30% of doing business
• Admitted to the WTO in 2012
Change/Fluctuation of Various
Rates
•
Increasing Interest Rates over last 5
years.
• International Trading - high interest
rates make currency less valuable and
less desirable.
• Inflation lessens a currency’s value.
• Decrease in GDP = decrease in exports
and monetary values.
RUB converted from $1 USD
Cautions and Recommendations
• Less Profitability – hard to predict potential earnings
• Increased Cost of Operations – Operational costs will
increase
Recommendations:
• Continuously analyze
• Consider possible merges with other businesses
Current Economic Conditions
• Purchaser’s Price Parity
• U.S. PPP, GNI, and GDP has
(PPP): Relative price
shown steady growth over
difference between
the last five years.
countries.
• Russian GDP has been
• Gross National Income
inconsistent and has shown
(GNI): How much a citizen in
little growth if any at all.
her nation makes per year
on average.
• Gross Domestic Product
(GDP): A nation’s total
output per year; how much
a nation produces.
Economic Conditions Cont.
• As inflation rises so do
the interest rates.
• Inflation: Increase in
prices and the fall of
purchasing power of
money.
• Interest Rates in Russia
are some of the highest in
the world.
• Percentage of inflation for
consumer prices in Russia
grows constantly.
• Borrowing money could
become very costly as
time progresses.
• Unemployment is at a five
year high of 6.5%
• Low GNI means low
wages for Russian
employees.
• Skilled workers may be
difficult to find.
Cautions and Recommendations
• Investing in any proposed business venture in Russia is risky.
• Inflation and interest rates continue to rise.
• High unemployment rates continue to negatively affect the
economy.
• Business ventures in Russia become less appealing as time
goes on.
Trade Agreements
• Bilateral Trade Agreements
• APEC – Special relationship with Canada
• US Exports to Russia rose 16 percent from 2004 to 2011
• Regional Trade:
• The Partnership Cooperation Agreement between Russia and EU
• Trade hit record levels in 2012
Business Regulatory Environment
• Starting a business
• 14 days
• Cost 3000 to 4000 rubles
• Can be done mostly online
• Paying Taxes
• Standard Tax
• Property Tax
• Income Tax
• Contract Enforcement
• Trials are timely
Russian Infrastructure
• Russia is in the middle of a recession.
• Recent military action in former Soviet countries has
caused tight restrictions from foreign governments.
• Importing abilities have diminished because of recent
invasions.
• Cost of gas and shipping would skyrocket for U.S. imports.
Uncertainties, Cautions, and
Recommendations
• Potential of becoming the
sixth largest economy in the
world.
• A leader in natural
resources, military, and
energy sources.
• 12th most innovative
economy in the world.
• Limited in its trade partners.
• High chance of trade
restrictions, sanctions, and
corruption.
• The risks could prove
greater than any potential
rewards.
Three Business Ideas
Shoes
• Competitive market
• Limited with western influence
• Favorable weather
• Low prices
Oil Industry Equipment
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Shore drill sells from $20 to $300 million
Russia has highest amount of engineering graduates
One of largest exports is oil
Reports show lack of technology for production
Service Machinery
• Several competitors
• Target areas that aren’t being targeted
• Well trained people
• Low operating costs
• Potential for government investment