Introduction
Diversity in business, whether in service or good industry, assists a company in increasing its sales. When diversifying, it is important to analyze the new market that the company will be operating in to ensure that the diversification will be of assistance to the business. Financial consultancy is a current form of service business that is booming in most countries.
When expanding, there is need to undertake an analysis of the country of venture and ensure that there is an opportunity worth to be exploited. Russia has great potential in financial consultancy services; despite this, there is need to analyze the prevailing condition of the country to evaluate whether a venture is viable or not (Solovyov, 2001). This paper gives an analysis of Russian potential in financial consultancy; it will evaluate, social, political, cultural and economic situation among other factors that can affect the business.
Brief History of Russia
Russia is a northern Eurasia country, which is officially referred to as Russian Federation. The country has 83 federals and runs a semi-presidential type of governance. It covers the largest land space on earth, which account to over a ninth of the total area; this makes it the largest country on earth with a surface of 17,075,400 sq kilometers (Thompson and Johnson, 1937). This large surface area also makes the country to be the recipient of the world largest non-exploited natural resources. In terms of population, according to census conducted on 2009, the country had approximately 143 million people making it the ninth populous country in the world (Zuckerman, 2005).
Economic Situation
The country has a capitalist system of economy with oil and petroleum gas as the most dominant products. It exports these products to different parts of the world and is the country’s largest foreign exchange earner. By GDP, it is the 12th largest country in the world and by purchasing power, it is the seventh. For the last ten years up to and including 2008, the county has had an economic growth rate of 7% per annum. According to the country’s poverty index, 13.7% of the Russian population lives below the poverty line.
There is growth earning from employment where it has risen from $80 in 2000 to reach $640 in 2008 (this is the average monthly wage). The country has undergone a rapid economic development with an increase of 6% unemployment rate in 2007 from 13 in 1999. The economic growth is a major determinant in making decision on whether to make an investment in the country. Russia has highly modern developed infrastructures; these are both transport and those of communication. The systems are advanced so well that access to the country from any corner of the world is highly enhanced; the airports, the seaport, and internal transport are well managed and assessable.
The communication network within and without is of high-tech. This is an asset to the business since it reduces the cost of doing business. On the other hand, the international markets are enhanced at all lengths. The sectors have seen the private and public participation, this boosts the efficiency of the systems and thus one can trade with approximate assumptions. The country has the world’s largest budget in military since it exceeds the Soviet Union (Drews, 2004).
Russia has well developed financial sector with the privatized and government participation in the sector. The banks are stable enough to sustain the growing economy. On the other hand, although this may not have a direct impact on our business there is the emergence of micro finance institutions in the country, the institutions are giving a lot of support to the small-scale trader evident in the country. Thinking of the economy from that angle, it means that the manufacturing businesses will eventually benefit.
Insurance companies are also a backbone of investment sector of an economy and Russia is not left behind. The insurance companies are stable enough and can handle big losses without going under. At the same time, there are reinvestment insurance companies that help in maintaining stability even further. The banking sector has enabled firms to get loans at favorable rates. The insurance and the banking sectors will thus have a direct and indirect effect. From a direct point it means we stand to benefit the efficiency of these institutions and from an indirect point is that as the other sectors get empowered the benefit trickle down to our business.
Social, Legal and Ethical Conditions of the Country
There are different factors special to Russia; they include language, perception, ethnic cultural background, racism, and religion. Although the country has become an international market known for its cheap products, over 90% speak Russian, that is, the national language. Secondly, since the country is highly developed in terms of technology, the population of the country perceives imported goods as inferior than their own. In the country, there is freedom of worship and thus this will not be a great problem to the company. The population of the country has over 160 ethnic groups but held together by a national culture of peace, they are allowed communicating in their preferred language though Russian is considered a common language.
The country has Christianity, Judaism, Islam, and Buddhism as religions mostly practiced with approximately 16% of the population as non-believers.
Russia has some elements of racisms where the local people discriminate against foreigners. This is likely to act to the disadvantage of the company since marketing in such an environment is a hard task. Language will offer a problem to communication, both to staffs who will be mostly Russian and to the customers. This will, though, be in the short term since the company will devise measures that will ensure that its management understands the language for effective communication.
Religion and ethnic background will not have much effect on the company. However, there will be need to understand the country’s culture since it will assist the company to know the persuasion methods to use (Kelly, 2001).
Political System in Russia
Russia has a semi-presidency system where power is distributed between the president and the prime minister. The prime minister is the leader of parliament and the president the head of state. The system is highly democratic with power exercised at three branches; legislation, executive, and the judiciary. The president has executive powers that give him the power to give rules and regulations to be followed in the country. This is the power accorded under the head of the state status. He also has the power to appoint ministers to head the federal government state corporations. He can declare national emergency in the country (Klyuchevsky, 1987).
Elections are held every six years where the president can be re-elected only twice. The cabinet is composed of the prime minister, his deputies, ministers, and assistant ministers. The president has the power to appoint ambassadors and the cabinet must approve high commissioners of foreign countries of which he has the power to rectify any convention as long as it does not contravene the domestic law without the need of parliament’s approval.
The parliament mostly consists of elected members from all the representative state and is mandated to making law of the country as well as vetting of appointment done by the president. However, this vetting is only those provided to be so by the constitution. The Prime minister is the parliamentally leader; he more often than not commands a majority of parliamentarians (Christian, 1998).
Cultural Barriers
Russian culture is expected to affect the marketing team in various ways. These include;
Cultural barriers
A business operates in an environment with people who have different cultures, way of doing things, economic and culturally beliefs a combination of these form a social environment. It is important for business coordination be in harmony with the social function of the larger society. There should be coordination between the values of the company as well as the community. Social norms are considered essential by the business organizations as the purchasing behavior of the customers living in a particular society is dominantly affected by these norms.
Culture shock
Russian culture is likely to offer stress, anxiety, confusion and feelings of being lost to marketers of the financial services business. They will not be sure of the best approach to take when selling services to the Russian community. Culture shock involves physical and emotional discomforts that one experiences when he has closed to another area with a different kind of culture than that of the home country.
Language barriers
Russian is the national language and official language of Republic of Russia. When selling the services there is need for understanding between the target markets and the marketers. Communication is the only process through which a marketer can sell his products to the target market. When doing segmentation, it is important to ensure that the marketers and target customers understand each other. There are different forms of business communication, which are formal and informal.
When all parties to a communication understand the message conveyed, then an efficient communication is said to have occurred. Business communication takes two angles; internal communication and external communication. Internal communication is how the inner customer (staff) communicates with each other and the management. They should be facilitated to air their views out. This is the way that issues can be solved with innovation and creativity enhanced.
External communication is how a business communicates with the outside world. This is in the efforts of marketing or complying with government policies. In external communication, there are also social corporate responsibilities that a company embarks on.
Norms, believes and attitude
Every society has some social norms and values that it holds. They are not written somewhere but are learnt with time. The new company will have to take time before it understands what the Russian value, what are their norm, and their attitude towards some situations. The perception that the Russians have on foreign companies takes time to grow. They generally do not judge a company but they look at the outcomes and how beneficial it is to them; if is beneficial they accept it.
Social isolation
The company after establishing the offices will feel alone and isolated. This is because they are not aware of the right approach to take to draw near the Russian people. The feeling may take a while but the employees should try to interact with the environment fast enough so that the isolation ends. It is only after the company is able to overcome the isolation that it will be able to market itself.
Managerial strategy to overcome culture shock and related factors
To overcome culture shock, employees should be trained on the following ten steps
- Feeling good about themselves, they should understand that what they are doing is normal
- Take an in-depth analysis of the culture and lifestyle of the new environment; there are some elements that can be learnt, have them
- Fully research the destination and communicate carefully with the residents found there
- Create a strong community around them, they are created within the first days when everybody is welcoming
- Avoid any negativity and ensure that they are always on the right. Do not criticize issues but have a personal ground. Let not people know where you stand but let them understand that you are independent to make decisions
- Have your goals set for what brought you there, look forward and never stay in isolation.
- It is important to have a coach. Coaches may range from individuals to corporate advisers like marketers
When the above steps are followed, then the company will integrate in the community effectively and fast.
Managerial Strategy for Russia Venture
Management is the driving force of an organization and the kind of approach that they give to different issues dictates the success of the organization. Decisions are the driving force in an organization. The quality of decision that managers make give their organization direction and focus. The growth and competitiveness of an organization is influenced by the quality as well as acceptability of decisions made by managers at all levels.
To come up with a good decision there are three main stages that a manager should follow they are defining the problem, data collection, and choosing the best alternative. Always a good manager considers the urgency of the decision before making one (Sekat and Varoudakis, 2007). The financial consultancy has a central management at the head quarters but give power to various branch countries to make decision pertaining countries needs. This will not be different in this Russian branch. It will ensure that they understand trends in the market and make decisions with that light in mind.
Factors to Consider While Undertaking the Venture
Russow and Okoroafo (1996) have proposed a screening method where the countries can be analyzed and compared for their attractiveness in market entry. This technique includes the criterion of market size growth, trade, capital spending among other factors. The higher market size growth to the product under consideration makes the country more attractive. Higher level of economic development signifies higher incomes and more demand, which means that there is a good chance that the products would sell. Population density means better markets where the greater number of people can be approached for selling products more efficiently. Infrastructure availability refers to the ease and convenience in producing and selling merchandise.
Sakarya, Eckman, and Hyllegard (2007) have explored the issue of market attractiveness in emerging Markets. Their work builds on that of Russow and Okoroafo (1996). According to their view, the emerging markets present tremendous opportunities while considering their market attractiveness for the particular product and industry. In addition to the factors listed above, four other variables should also be considered. These are long-term market potential, cultural distance, competitive strength of the industry, and the customer receptiveness. Of these four variables, cultural distance is beyond the scope of this study as it (the study) is being conducted from a general international standpoint.
Long-term market potential refers to the dynamism of the economy. A country would be more attractive if it has greater long-term potential in terms of market growth. Competitive strength of the industry in the target country refers to the application of Porter’s Diamond. It should be seen as how the “factor and demand conditions, related and support industries, firm strategy, structure, and rivalry” (Sakarya, Eckman, and Hyllegard, 2007). Customer receptiveness refers to the consumer attitudes towards the particular product under study. If the consumers are receptive to the product and they have a positive attitude, then it should be considered positively.
Buthe and Milner (2008) have investigated the importance of commitments of the host country to the protection and fair treatment of the foreign assets in the local jurisdiction. According to their research, the countries which provide international commitments in the specific sectors by ratifying the treaties under WTO and joining more and more preferential trade agreements are likely to attract more foreign investment. When a country commits at the international forums to the protection of foreign assets in the home country and to non-discrimination, it reassures the foreign investors. It helps to create an environment of trust and confidence in which the foreign investors would be more comfortable coming. The country, which has more incentive and security, is likely to be more attractive to the foreign investors (Reid, & Plank, 2004).
Leadership Strategy
In Russia, the company will have to be managed from a distance. This is a style of leadership where policy makers are not on the ground but give instructions from a distance; the head office of the financial management firm will use the approach. In this style the leader, ensure that he has a well-structured team, which can be run alone without much control. He may also operate via micro team leaders who are answerable to him.
The kind of leadership has one advantage over other styles in that it offers team members a chance to undertake decisions without always consulting the leader. They are trusted with programs and thus given a chance to exercise their talents and potentials. Managers on the ground in Russian financial consultancy Company should adopt a close leadership style. This is leadership where the leader is in close proximity with the subordinates. He is with them at all stages and goes through different experiences with them.
He understands problems that his team is undergoing through and participates in decision/solution finding, not from a told point of view but an in depth understanding angle. The leader is with the team almost every meeting where he held periodical meetings with the team to discuss different issues affecting them. The teams are supposed to formulate agendas of the day, which are reflection of the past days experience. Close relations lead to a team that fully understands each other’s strengths and devise means of creating efficiency (Sadler, 2003).
The marketing approach in Russia should also be strategic. Despite the market for the industry increasing, there are international companies in the industry that adopt different marketing strategies for their success. It should use integrated marketing strategy to market their services. This marketing strategy incorporates different marketing strategies to have one strategy that can effectively fight their competitors. It integrates advertising, public relation, direct marketing, and personal selling. The company should ensure there is adequate capital to finance its projects at any one time (Earl, 1996).
Internal customer’s satisfaction and cooperation is also important in ensuring that the company has a creative and innovative work force. There are a number of talents in Russia that can only be tapped if the company develops a good communication method that targets the talents of the company. There is facilitated communication between company employees (internal communication) and external communication. Business communication is vital for success in all businesses.
Success in this context means, being able to accomplish a particular task or to achieve a specific objective. Good business communications in relationships with either fellow staffs or customers is needed in order to prosper. Business success can be measured in terms of the practicability of business relationships, which is directly proportional to the quality of communication. When there is a well-coordinated communication, the company will be able to attain its targets (Hooley & Saunders, 1993).
Conclusion
Russia has potential in financial consultancy services. At the same time, there are threats that are likely to be faced in the country. Opportunities that the country offers to the company include cheap labor, market (both as a local and an international market country), developed technology, good infrastructure (both institutional and physical), and positive economic growth rate. To remain in the competition, adopting robust marketing strategies is important. Improving of services and ensuring that all the population is reached is the secret for survival in the market.
The company should come up with a new pricing strategy and develop mechanisms, which allow product differentiation and adopt a new leadership strategy. This will ensure that the needs of customers in the changing market are met. Some of the populations do not understand the need for financial management consultancy and thus the company is mandated with the task of training them on why they need it in their lives and businesses. By this, the company will be assured of an increased demand for its services. It is also important to note that knowledge management in consultancy business is very important.
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