Russia requires perseverance from experienced exporters
Tracy Meharg, Invest Northern Ireland’s MD for Innovation recently led a 14- strong trade mission to Russia. Here, she outlines some of the challenges and opportunities in the world’s biggest country, spanning 11 time zones.
Doing business in Russia certainly isn’t for the faint hearted or newcomers to exporting. It’s a market that rewards experienced exporters prepared to persevere, be patient and ready to invest the necessary time, money and other resources.
It’s no coincidence then that the local companies currently doing business there, such as FG Wilson, AJ Power, FM Environmental, Powerscreen International, Ulster Carpets and Randox Laboratories, gained experience and confidence in other markets before venturing into Russia.
Other local companies, most recently CK International, are accessing the tremendous opportunities that exist in Russia through partnerships with companies in neighbouring nations such as Finland, Latvia and Lithuania which have been doing business there for many years. Others use relationships with multinational corporations as a means of market entry.
Having experienced steady economic growth that saw GDP hit an impressive 4.1 per cent during the first quarter of this year, Russia is a huge and growing marketplace of 140 million people that is rich in natural resources, particularly oil and gas. So it is no surprise that we have identified it as a growth market and are assisting local companies to explore opportunities there through our trade missions.
As part of the BRIC grouping of Brazil, Russia, India and China, it has been ranked by UK Trade and Investment (UKTI) as one of the world’s most significant developing markets. The focus on Russia contributed to a 51 per cent growth in UK exports to £3.5 billion last year – making it our 12th largest export market with Russians keen to catch up with western technology in particular.
The most promising opportunities for local companies are in advanced engineering, especially aerospace, financial services, ICT, power/energy, sports and leisure infrastructure (particularly the Sochi 2014 Winter Olympics), airports, construction, creative Industries, rail and water services.
It is clear that local companies wishing to do business there must be prepared to devote time to building trust and strong personal relationships to overcome the suspicion that still exists within Russian business about the West.
Attitudes to Western influences including consumer trends are changing steadily largely because of the emergence of younger middle class and the drive by the government to modernise the industrial base and raise productivity to European and US levels. While Russia may be behind in many technology areas, it shouldn’t be seen as being backward in commercial terms. It has many areas of expertise and is developing steadily into a market-led economy.
While most business is centred on the key cities of Moscow and St Petersburg, locations for Invest NI trade missions to Russia, other regions such as the Urals, Volga and Tartaristan are developing rapidly and shouldn’t be ignored. Indeed, they could be worked into a wider and longer term business development strategy for Russia.
Overall, Russia is a marketplace that requires a strategic approach. Research and preparation are essential before a business trip there. Nothing should be taken for granted. For example, a visa covering the full period of the planned visit is crucially important. If the visa runs out during the visit and this is discovered by the police, there’s a very real danger of deportation. And don’t assume that all Russian business people speak any English. It’s worth learning some Russian and lining up and briefing a qualified interpreter in advance. Even then, don’t assume that an interpreter will grasp the features of your products and/or their technical aspects.
At the core of a strategy for the Russian market must be a strong commitment to monitor and manage business partners there on a regular basis. Good business can be developed by finding the right partner, making sure that any contract spells out clearly responsibilities and obligations such as technical support, and by setting up a structured and agreed sales plan.
The clear message I brought back from our recent mission is that Russia offers huge opportunities across a broad range of industries for companies that approach this market in a structured, strategic way and are ready to commit the necessary resources.
This article was published in Ulster Business, June 2011 edition.