The Challenges and Benefits of Doing Business in Russia

Over the past year, Russia has made headlines by reportedly meddling in the US election and stoking the fire of confrontation with Ukraine. Given the country’s reputation for controversy, it’s no surprise that companies face a number of distinct challenges when doing business abroad in Russia. However, the world’s largest nation also presents several unique opportunities that could make the right company’s international expansion extremely successful. Here, Galvin International break down both the drawbacks and the benefits of expanding to Russia, so you can determine if it’s a strategic move for your business.

The Challenges

Preparing for the following challenges when doing business abroad in Russia can save you time, money and energy:

Sanctions

In light of Russia’s aforementioned transgressions, the EU and the US have implemented sanctions against the country and many other nations have followed suit. Such sanctions have a massive impact on imports and exports and can limit the operations of businesses active in Russia. Have a look at our blog post on sanctions and international business for more in-depth information on coping with sanctions.

Vast size, varied markets

Russia spans nine time zones and has a wide variety of markets. Ensure you focus on your target market. For example, if you are planning to set up in Sakhalin to service the local oil and gas opportunities there, remember it is 8 hours ahead of Moscow. Find local support which can give you the responsiveness and on-ground help you need.

Corruption and transparency issues

The extent of corruption in Russia is difficult to quantify, but it’s known to be a major problem, particularly within the judicial system and the higher levels of government. It’s crucial that you comply with your home anti-corruption laws, e.g. all UK businesses must comply with the UK Bribery Act, as well as all anti-corruption laws enacted by the Russian government.

The Benefits

It’s also important to consider the advantages of expansion to Russia – despite sanctions and corruption, many aspects of Russian business are thriving:

Growing middle class

With Russia’s middle class rapidly increasing in size, many foreign businesses are finding that Russian consumers are highly receptive to their brands, particularly in the realm of luxury goods and food and drink. Depending on your industry, you might find that Russia is home to the perfect market for your company.

Investment prospects are looking up

Russia has initiated new investment programmes and is encouraging foreign investment, which could prove beneficial for businesses looking to find funds and continue the expansion process.

Strong logistics and supply chains

Though Russia’s size can make logistics and supply chains a challenge, recent developments in transport links and infrastructure have greatly improved the logistical efficiency of doing business in Russia. In addition, international expansion to Russia could open up opportunities to export to other countries in the Commonwealth of Independent States.

Companies that are able to balance the risks and rewards of setting up a business in Russia could find measurable success there. If you’re considering international expansion to Russia or any other location, Galvin International can help you determine the right target market for your company and walk you through each step of the global growth process. Our one-stop international expansion concierge service provides expert guidance and implementation. Get in touch with us today to learn how we can help your business thrive in new markets.

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