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How to win a business assignment in Russia

by: Pia Kähärä, Associate partner of Hofstede Insights

Why should I read this document?

The goal of this document is to give some specific details on how business is conducted in Russia, and give a few pointers on how to do it and win. What should be highlighted and some aspects of Russian culture that might help you win.

Important! 

5 most important things to know about doing business in Russia (if you only read one thing this is what you should read).
 
1. Build relationships and trust first. In Russia - a collective culture - you can hardly win business assignments if you have not met and created trust with the company management you are making an offer to. There is no point in working hard on writing offers for random email enquiries from Russia.
2. Negotiate at a high level in a hierarchical culture. Bosses make the decisions, specialists consult the bosses and managers take the decisions into operation in Russia.
3. Make detailed presentations and offers.
4. Remember to check the rules of the game. Sometimes there is corruption (the deal already agreed before the tender) and no point in taking part in big tenders, for example.
5. Trust but verify. Check important information from different sources. Have it in writing.

"Russia is a specific mixture of Eastern and Western cultures in business. It is also a new market economy which sometimes has its own rules of the game.  Do not make presumptions about the business based on the logic of your own market, and find local people to help you to navigate through the cultural differences."

 

Build the relationship

Russia is a collective culture and at the same time a high uncertainty avoiding culture. It means that business deals are made between friends and relatives when possible. For a foreigner, it means that you must build a good personal relationship and trust by personal meetings with the potential partners and clients. There is no point in spending a lot of time writing offers for random email enquiries from Russia.

As Russian business is more personal than just business, it is common to exchange souvenirs and gifts between business partners. It is advisable to remember your partners’ birthdays. 

Also, it is important to do your homework well. First of all, you must evaluate and understand the nature of the deal, for example, in bigger tenders. Does the buyer require bribes? Has the deal been pre-agreed unofficially? Not all deals are worth looking for.

Negotiate on a high level

It is important to understand that in a hierarchical culture you must always aim as high as possible. Bosses make the decisions, specialists consult the bosses and managers take them into operation in Russia. Russian bosses expect to negotiate with bosses, too, so you must either be a boss or bring a boss with you to support you in negotiations. It is a sign of respect. When you come from an individualistic culture with low hierarchy, it is sometimes hard to get your boss to travel with you, but you can ask for a proper director level title for yourself for the Russian business card.

Read more: Negotiation in Russia

Make detailed presentations and offers

Many Western European managers have encountered the problem that their presentations do not exactly meet the demand of Russian customers and partners.

The same concerns offers/quotations. As Russia is an uncertainty avoiding culture, they want to avoid mistakes by checking all the details, but also need to be able to justify the often higher price acceptance by technical details. So be specific and detailed, but flexible.

Getting to the contract through bureaucracy

When the client/partner company boss says ‘yes, we will proceed in business with you’,  the work with lower levels start. However, don’t believe only oral promises. You need a signed and stamped contract to be sure. Starting the cooperation means many bureaucracy issues need solving: acquiring certifications, preparing the detailed contract text which is suitable for your partner’s bank and customs procedures, adapting product package markings to the market needs, etc. You usually need support from several departments in your own organization.

Be flexible to not to lose business

The Russian business environment has taught people to be creative in unexpected situations. If you are too rigid and always stick to the rules of business that you are used to at home, you can lose business in Russia. Be flexible and creative.

For example, when the Russian legislation requires a certain kind of package marking and labeling plus Russian instructions for the products, they just need to be done in order to do business “But we don’t need this in our country” type of thinking does not help.
 
Planning difficulty in Russian business is always an issue. Western companies are used to budgeting and delivery planning for a good deal of time ahead. In Russia, it is often hard to get this information from the distributors/importers, as they do not get it from the end-customers. If possible, leave some space for changes in your planning. The better your relationship with your partner company is, the more they will do for you. I-give-to-you, you-give-to-me works well.  
 

 

Short case study

My team helped a Scandinavian producer to negotiate a deal with the large industrial distributor in Russia. As the distributor had its own shoe production as well, and the products we offered were very highly priced for the market, the distributor was very sceptical about the cooperation in the beginning. We organized a factory visit for the Russians, several negotiations in Russia on different organizational levels to create trust (top management, purchasing management, product management, sales management, marketing management), sent free samples for testing, asked for product feedback from the regional subsidiaries to convince the central management, etc.
 
In total, we worked on the case for more than a year before signing the distribution contract. After signing the contract, the company renewed its product certificates upon request of the distributor (which is also a significant investment). This was all done upfront without knowing the future sales volumes, which Russians usually do not want to give in very exact numbers.  After getting the product certificate, the company got its first order from the distributor. Its large volume took everybody by surprise in the factory, nobody could have anticipated it. My team knew the distributor management from beforehand and we worked on our personal relations to create trust between these companies. Without our personal recommendations about these companies they would not have done any business together.