(Last updated: 19 July 2012)
Doing business
Current business situation
Russia is one of world’s most important emerging markets, defined by both its size and its growth potential. Despite the difficulties of the global financial crisis, the Russian economy has performed remarkably well over the last decade. Many Australian companies have been exporting to Russia for years and have successfully established themselves in the market. Australian small and medium-sized companies are now represented in the market alongside large, well-established multinational companies.
Business opportunities
Russia is one of world’s most important emerging markets, defined by both its size and its growth potential. Despite the difficulties of the global financial crisis, the Russian economy has performed remarkably well over the last decade.
Many Australian companies have been exporting to Russia for years and have successfully established themselves in the market. Australian small and medium-sized companies are now represented in the market alongside large, well-established multinational companies.
Business culture
Business tips
As with any international market, Russia has its own way of doing business and unique social norms. For Australian exporters, it is important to take time to understand how business is done in Russia and how to maximise opportunities for success in your business dealings.
In Russia, strong personal relationships are critical to business success. Hence face-to-face business meetings are vital. Here are a few pointers that can help you achieve a successful outcome:
- Plan what you need to say. Many business visitors fail to present the most relevant benefits of their product. Most business people do not have time to listen to long-winded presentations.
- Make sure that all of the necessary information is readily available and your website is in working order.
- Brochures, promotional materials and samples should be of high quality, matching industry standards. Use metric measurements. If possible, translate the most important marketing materials into Russian.
- Speak slowly and clearly. While some Russian business people will speak English, they will be more accustomed to American or British accents. Minimise use of slang and provide clear, concrete explanations. Austrade can assist by organising an interpreter to accompany you during visits to the market.
- When negotiating, remember that your first price is seen as a starting point for negotiations. Potential business partners will expect several offers and counter-offers before a mutually acceptable price is reached.
- Russians are generally courteous and positive in listening to your presentation. This can leave a false impression of interest or commitment on their part. You should be careful to clarify what you understand to have taken place. This can be done conveniently in a follow-up email.
- The meeting should conclude with the understanding that you will follow-up. Do not rely on the Russian business person to make the next move. It is vital to follow up on the phone, on email and even in person to build relationships with potential business partners and customers.
- Fast and comprehensive follow-up is essential in successfully doing business in Russia and the CIS. The Russian business cycle can move considerably faster than in Australia — sometimes clients may even want to sign contracts on the same day. Often the relationship can go cold unless there is immediate follow-up.
- Promised delivery dates and production quantities must be honoured. Failure to deliver agreed quantities at the promised time will lead to lost business and a tarnished reputation for your company and for Australia in general.
- Russian business people tend to dress quite formally. A business suit is expected business attire for men. For women similar guidelines apply. Pant suits are fully acceptable in Russia. It is preferable to dress well and conservatively to create the right first impression.
Setting up in Russia
Finding the right partner
Sustained business in Russia and the CIS requires commitment to a long-term market strategy.
A first step in this process is to determine the type of in-market representation best suited to your objectives. You should consider your needs at the time you enter the market while ensuring you have sufficient flexibility to adapt as the market develops over time.
Prior to formalising representation, it is prudent to ensure that the structure proposed is appropriate under local law and that you understand fully the implications of any agreements in the local context. You should ensure the agreement protects your interests to the fullest extent possible. Ultimately, as in any market, the durability and success of your representation arrangements will depend not so much on your formal contractual undertakings, as upon the strength of understanding, trust and communication that you develop with your in-market representative.
Austrade Moscow and Vladivostok can offer specific assistance to help you identify a range of companies, be they direct importers, distributors, agents, or joint venture partners, from whom to make your selection of the company best suited to your forward plans.
An increasing number of Australian companies are looking to invest in the Russian market through the establishment of local operations in the form of a representative office, branch office or legal entity (subsidiary). A number of useful guides are available to help you make an initial assessment of the different options:
- Baker & McKenzie: ‘Doing Business in Russia‘
- Deloitte: ‘International Tax and Business Guide: Russia‘
- KPMG: ‘Doing Business in Russia‘
- PricewaterhouseCoopers: ‘Doing business and investing in the Russian Federation‘
Austrade can recommend legal and accounting advisors to help structure your arrangements in keeping with local requirements. Austrade can also suggest other ways of checking the suitability of prospective partners. A useful guide is an assessment of the companies your prospective partner already represents. If appropriate or possible, you may consider speaking to some of these companies to gain a sense of how the local company is performing for them.
A golden rule is always to take your time in this selection process as it is generally the most important decision in ensuring that your business not only gets off to a good start, but continues to grow in the market.
In-market representation
Russia is the world’s largest country in geographic terms. Before assigning the entire market to one particular company, assure yourself that the company is capable of servicing such a geographic spread. You may wish to consider, for example, separate representation for the Russian Far East and western Russia. Moscow and Vladivostok are more than 9,000km apart.
Austrade Moscow and Vladivostok are well placed to advise you how to ensure your representation has the right geographic footprint.
Banking and finance
Since Russia’s realignment towards a market-based economy in the 1990s, banking infrastructure has developed rapidly. The country’s increasing prosperity and rising personal incomes have contributed significantly to this growth and to the proliferation of banks.
There are today approximately 1,000 banks in Russia, a number that has halved in recent years owing to stronger regulatory oversight. The state-owned savings bank, Sberbank is by far the dominant operator in the market. It holds over 50 per cent of all deposits in Russian banks and manages 35 per cent of retail lending and 32 per cent of commercial lending. The top 20 banks in Russia control some 65 per cent of all Russia’s banking assets. A number of foreign banks are represented in Russia. Some have established a presence by buying into existing Russian banks or creating new Russian banking entities.
Links and resources
Government, business and trade
Embassy of the Russian Federation in Australia – www.australia.mid.ru/
Ministry of Foreign Affairs – www.mid.ru/
Federation Council (Upper House of the Federal Assembly) – www.council.gov.ru/
Government of the Russian Federation – www.government.gov.ru/
President of the Russian Federation – http://eng.kremlin.ru/
Russian Academy of Business and Development – www.ex.ru/
Russian Federal Government Ministries – www.gksoft.com/govt/en/ru.html
State Duma (Lower House of the Federal Assembly) – www.duma.gov.ru/
News and media
Izvestia – www.izvestia.ru/
The Moscow Times – www.themoscowtimes.com/index.php
St Petersburg Times – www.sptimes.ru/
Please note: this list of websites and resources is not definitive. Inclusion in this list does not imply endorsement by Austrade. The information provided is a guide only.