We provide a guide to doing business in Moscow, including an overview of Russian business culture.
Working or starting your own company in Moscow requires patience and understanding of its unique culture. Russian life is often unstable and short, but as a result people tend to live more intensely. This ‘way of life’ is noticeable to people settling in Russia or making a fresh start there.
Despite the big gap between the rich and the poor, and the miserable situation in which some Russians find themselves, they enjoy life as fully as possible. Jelle Brandt Corstius said in Vrij Nederland: ‘’I think a lot of what I value in Russians, like inventiveness and hospitality, are born out of need. They are maximalists, the Russians; it’s all or nothing. The ‘poldermodel’ we know in the Netherlands, did not get through.’’
As a new inhabitant in Russia it is necessary to show some perseverance, but you will soon enjoy the Russian hospitability and the diversity this country has to offer you!
Current economic situation in Russia
Russian Federation, Novo-Ogarevo : Russian Prime Minister Vladimir Putin (4R) meets with heads of US company General Electric (GE), CEO Jeff Immelt (2L) and President and CEO International Ferdinando Beccalli-Falco (L) outside Moscow in Novo-Ogarevo on 4 June 2010. The group held talks on business in Russia.
Russia is one of the four BRIC countries; Brazil, Russia, India and China. These countries are considered to be rapidly increasing in power and are expected to catch up with the richest countries around the year 2050.
Before the worldwide economic crisis took place, Russia experienced a very prosperous period. In the years leading up to the financial crisis, the economy grew about seven percent and the wages rose about 10 percent to 15 percent. It therefore appears that Russia has left behind the economic crisis of the nineties.
However, if you consider the fact that it was only in 2007 that the level of growth of real income (GDP) was surpassed, these numbers are slightly less impressive. The economic growth of recent years was stimulated by higher oil prices in 2008 and the foreign capital inflow into Russia. Because Russia has renounced these two economic forces, the recent financial crisis is affecting the country severely. Furthermore, the distrust of the Russian government plays a significant role in the current economic situation.
History has shown Russia’s resilience in times of economic crisis so experts expect its economy to yet again improve when the worldwide crisis subsides.
Harder than before
Clinical psychologist Lisette Breukink who lives in Saint Petersburg since 1999 and runs her own company says starting one’s own company in Russia is harder than before, but states that it is certainly a nation which can enrich your life.
While now may be not the perfect timing to settle in Russia, the Russian business is still in motion and keeps on developing itself. When you approach the Russians with an open look without any prejudices, you will see that Russia offers sufficient possibilities and opportunities to build up a successful life.
Patience is an essential virtue in Russia
In Russian companies they tend to follow a charismatic and paternalistic leadership style. Traditionally, businesses in Russia are set up hierarchically which causes a certain bureaucracy to occur.
Since the implementation of the glasnost and perestroika by Mikhail Gorbachev, a lot has changed in Russia, but those changes are noticeable matters which are directly visible; fashion, cars, and the nightlife.
Nearly every Russian still carries the heritage of communism with them; this means Russians are not used to taking initiative as they risk making mistakes. The senior management will always take the final decision, and this way of organising a business causes delays in the progress of activities, meaning patience is required in some situations.
In this framework, a well-developed social network is very important and knowing the right people in the right place will help you to avoid the bureaucratic obstacles.
“In Russia one can only succeed when you know people. Relations and networks are the key words. Who you know matters, and especially so if you are foreigner who can get access to these networks.’’
Breukink added she has learned to stop ‘‘…planning everything, but just letting things to happen as long as you stay true to yourself. Often, creative ideas and solutions pop up automatically if you let things take their course.’’
Russia, St. Petersburg: Commercial Dock
Russia has gone through some big changes, but behind its external appearance, traditional standards and values still exist.
Willem Ripmeester travelled regularly to Russia in the fifties, sixties and seventies and still has a fondness for Russia: ‘‘Behind this facade the Russians haven’t changed that much. In business life they are still the tough negotiators as they were previously. Honest in their approach, but also pretty unforgiving. Negotiating in Russia is often a long process: caution, persistence and modesty are the core words. A ‘final offer’ does not always mean that the offer actually is final, so you might have to have patience and perseverance in closing a deal.
Meetings have a formal atmosphere and sometimes they follow a fixed protocol through which a meeting, according to Westerners, lasts unnecessarily long. A joke made (even with the best of intentions) is often not appreciated in such a setting.
During negations the atmosphere is somewhat lighter and in these situations it would not be unusual if Russians show their sympathy towards the other. On the contrary, the social aspect is often experienced as essential and might even be decisive: ‘’Russians are warm-hearted; you will only achieve a business deal based upon personal trust. By being honest and sincere you will win their trust pretty quickly.’’
Peter van Stigt who started his own company in Russia said: ‘’Sometimes your Russian business partner trusts you even more than his fellow countryman. Do not go to Russia with the expectation to introduce western business concepts at an operational level.’’
It might occur that you have to endure long silences without getting any reaction from your business partner. Then, suddenly, you might get the message that your partners are willing to place a huge order and close a deal with you: ‘Tomorrow!’, and your reaction is: ‘If only I had known that before…’. That is why it is important to learn how to anticipate these kinds of situations in order to facilitate communication between several parties. To be able to sense these matters, you have to have experienced them for many years.’’
Mixing pleasure with business
In the meantime, try to enjoy the Russian way of doing business. The socialising aspect of business life makes working in Russia very pleasant. You may suddenly get an invitation to spend the weekend in the dacha of your business partner. Business dinners at the home of the business partner are also common and you will be treated as a real guest.
The cliché that exists about Russians and their vodka exists for a reason. Whether you visit them, meet them during your travel or having a business diner with them, the bottle of vodka will always appear.
A deputy managing director of a Dutch import company shared his experience: ‘’When I was in Russia to do business, my Russian business partner invited me to have dinner at his home. I really had a pleasant evening; excellent host, delicious food, enjoyable company and a lot of toasts. In general it is accepted if you say you do not drink alcohol, but when they proposed a toast to the Warriors of the Country I could not avoid having a drink with them. When I arrived at my hotel I had had one too many, but it brought about some productive cooperation!’’
However, Ripmeester advised: ‘’Drinking alcohol is part of the Russian culture; sometimes closing deals requires some alcoholic drinks… But try to avoid getting drunk. The Russians will interpret this as a sign of weakness, and, even more importantly… it is bad for your health!’’
Click here if you want to find out how to apply for a work permit in Moscow.