The German producer of a quality, up-market beer has decided to open a business in Russia. Prior to this, it has looked at the way in which sales are usually made in the RF via distributors. Its business has been approved by the partners on the Russian side. But, no sooner is it time to fulfil the initial obligations, then the EU introduces sanctions against the RF. Cooperation has remained unrealized to this day.
In 2014–2015, many Russian and foreign companies operating in Russia found themselves in a similar situation. But there are quite a few examples of when retaliation to the sanctions didn’t hinder the mutually profitable business of foreigners and Russians. For instance, it is possible to think on how to set up joint production within the CIS whilst making allowances for new political realities.
One of the ways of collaborating is to localize production by involving a neutral intermediary. Such an intermediary would be able to act as the German company’s legal representative in the region for the duration of the sanctions.
Despite the potential difficulties and risks posed by this suggested solution, it is worth remembering that the sanctions are a political decision after all, and they will, at some point, come to an end.
A German company providing services in organizing business training trips lasting several days in Europe and Asia, started to work with one of the prestigious Russian colleges. The collaboration was a success, but in 2016 it became extremely complicated due to the difficulty in getting the necessary numbers together to go on such trips.
StrategicInterCom GmbH: develops and delivers specialized business programmes aimed at improving the skills and abilities of businessmen, executives, highly-qualified experts, and private individuals.
StrategicInterCom was founded in 2010 in Munich. The company’s head office is located in Frankfurt am Main.
Nevertheless, the partners don’t sever ties. And continue to value highly the prospects for cooperation. Because, despite the large number of colleges in Russia, very few of them have any real contact with business beyond the country’s borders. Therefore, attracting a company specializing in organizing training programmes abroad allows not only the acquisition of a pool of exclusive business contacts, but also the resolution of any organizational issues to do with putting on events abroad. At the moment, cooperation between partners is arranged as follows: the college prepares a list of participants, and from its side sets out its concrete requirements regarding the training programme at the same time as the provider company goes about designing and delivering the programme itself. In the crisis, such a form of collaboration has proved itself to be successful, effective, and reliable.
An average-sized Chinese construction company with European investors wants to enter the Russian market for building eco-homes. Negotiations begin, but during them a mutual distrust arises between the Russian, European, and Chinese partners. The Chinese side expects from the Russians a guarantee regarding the sales of the product offered, and the Russian businessmen are not prepared to take the risks upon themselves without the option of a presence on the inaugural board of the new company. The end result is that the foreign investor decides to go it alone and develop its business in the CIS and sets up a Russian form of a limited liability company in one of the cities.
This step is inadequate as the starting of a company in such a form by a foreign legal entity is no guarantee of business success in Russia. Such a situation is not a rarity in international business. It is characteristic not only of Russia but practically every country in the world. Therefore, it is recommended to act unerringly in such a situation.
First, it is preferable for the foreign entrepreneur to refer to a local agent who deals with forming legal entities in Russia, finding out beforehand what services he provides and which clients he already has on his books.
Secondly, it is necessary to settle upon a partner who will take upon himself the work related to accounting as, for example, Russian law around tax is specific and requires specialist knowledge.
Thirdly, it is worthwhile for the foreign company to enter into strategic cooperation with one of the local manufacturers of similar products or with one of the companies providing the same kind of services. Following these simple rules will help you to quickly get your business on its feet.
A European company has decided to join the Russian market for staff development and training. It has turned to a Russian businessman who claims to have numerous contacts in this area. After signing a memorandum on cooperation, the European partner has presented the Russian provider with the content of its programme and a package of marketing materials. Their work together begins, but six months later both partners cease cooperation. The end result being claims from both sides regarding unfulfilled obligations, and the subsequent breaking off of business relations, to the point of a lawsuit being pursued by the European partner.
The problem in this case was that the Russian partner was not a professional in this industry and was counting on a large number of sales down to the European reputation attached to its western partner. Furthermore, as it later turned out, the Russian businessman did not in fact have the number and quality of contacts he declared in the memorandum. Furthermore, the Russian partners budget for rolling out the programme was extremely small and was not enough to attract qualified experts via advertising or public relations exercises. Add to this the high standard of competition in Moscow and the worsening situation in Russia to do with the economic crisis. All this had a negative effect on sales of the programme.
So as not to find oneself in a similar situation, it is recommended to carry out a thorough audit of the partner company. As well as seeing the list of previously done deals, the plan for implementing joint projects should be requested. It is also necessary to analyse the market, and to go to other counteragents with an offer of cooperation, one which makes clear for your own benefit the advantages your own product has on the Russian market.