Russian International Business: Conclusions and Future Directions - Term Paper Example

 Country Analysis: Russia Introduction Since the early 90’s, Russia had been trying to replace a Communist system with a democratic political system. Being the largest country in terms of area, Russia has a diverse ethnic population. Even then, the communal spirit and togetherness is something which differentiates it from the West. Though the communism belief has faded away, there are still signs of egalitarianism i.e. a social philosophy that encourages an equal distribution of benefits among people.

According to the BRIC report on the emerging economies of the world, Russia has been ranked in the top 4 fastest growing economies in the world. In fact, Russia is considered to be one of the better choices for investment because of the cheap labor and resources available. The high growth rate of Russian economy is evident from the following empirical data:- Interest Rate Growth Rate Inflation Rate Jobless rate Exchange Rate 7.75% 2.70% 7.60% 6.60% 30.5 USD *source:tradingeconomics.com The jobless rate is decreasing annually owing to the increase in the foreign players investing and setting up business in Russia.

The strong inflation rate is a cause of worry for the country but the government and central bank are taking measures by implementing the best and adequate fiscal and monetary policies in order to lower it down within the permissible limits. The GDP per capita based on Purchasing Power Parity (PPP) is currently estimated to be 15,923 USD, as found by National Statistical Data sources. This PPP forms approximately 3% of the world share of PPP. This is likely to increase as indicated by recent IMF reports.

The high y-o-y growth rate of 2.7% (after the world was rocked by economic recession) coupled with a growing exchange rate is very enticing for FDIs to invest in Russia. As purchasing power has started increasing, a strong and fruitful opportunity for FDIs is awaited. This is the reason why the finance ministry of Russia is of the strong opinion that post economic recessionary period which started in Oct 2008 , the foreign direct investment will increase much above 60 billion USD. Once a part of -Union of Soviet Socialist Republics" (USSR), today Russia is a self-reliant and developing country.

This is also evident from the fact that it is one of the strongest members of the Commonwealth of the Independent States (CIS). Many monetary and fiscal policies have been implemented in Russia so as to open the gates for FDIs and transform the country into a market-oriented economy. The increase in the consumer expenditure, decrease in poverty and relative increase in the middle class are major indicators of a developing economy. In fact, there are more reasons for the growth in the economy over the past few years.

These reasons can be linked with increasing exports, high crude oil prices and increasing production and industrial output. The labor in Russia is predominantly educated and skilled. This added with the fact that Russia is strategically a strong member of CIS which helps it in providing fast and effective access to the other members of CIS, makes Russia a very profitable market for both domestic and international business. Cultural Environment Russia comprises of a huge population of approximately 140 million people predominantly of East Slavic tribe.

Some of the other tribes in Russia are Ilmen Slavs, Vyatiches, Kriviches, Radimichs and Severians. Even though Russia has a diverse background in terms of the various tribes, the society exhibits far more collectivism than the neighboring countries. Russia’s society comprises of a high context culture. They value social relationships and concern for others. Status in such a society is based on social standing rather than individual performance. This is in contrast to the culture prevailing in the West where people are more oriented towards achieving goals in the least amount time.

People are comfortable talking with strangers. The space between the two persons in conversation is much less and invariably they greet each other with physical contact. This is also evident from the analysis of Hofstede’s dimensions of culture that exist in the roots of Russians. All five dimensions of a culture as stated by Hofstede are evaluated based on a study and the results are discussed so as to form a big picture of the kind of cultural environment that prevails in Russia. The Hofstede’s cultural typology is one of the best methodologies in determining the cultural environment of a country.

The following results are derived by taking an average of all the responses from more than 1500 respondents scattered in various locations across the geography of Russia based on a report.(Nath,R., Sadhu,Kunal, K.) (1988). S.No. Dimensions Score 1 Power Distance High 2 Individualism Moderate 3 Masculinity Low 4 Uncertainty Avoidance High 5 Long Term Orientation High With reference to the above mentioned parameters and respective scores, we can conclude that Russia is a country with mixed scores in the different dimensions.

The high score in the first dimension, power distance, shows that less powerful sections of the society have high acceptance for the power to be distributed unequally. A moderate individualism or collectivism in a culture means that some sections of the society are primarily concerned with their individualistic interests and the others are satisfied in staying in cohesive groups. Even then the major characteristic shown by the Russians is that of a collectivism nature. The third dimension has a low score which describes a culture in which social roles of both men and women are common and hence they do not reveal a highly ambitious behavior.

The high score in Uncertainty avoidance which accounts for the fourth dimension means that members following this culture are very uncomfortable with situations which are not clear or ambiguous or unstructured. The last dimension i.e. Long Term Orientation has a high score which signifies a long term oriented society where members of the society value perseverance and thrift and the passage of time is not of major importance. Together with economic condition prevailing in Russia, such patterns of behavior shaped by this culture, justify the reason why entrepreneurs consider the breakeven time in business to be insignificant.

References Nath,R, and Sadhu, Kunal K., (1988) ."Comparative Analysis, Conclusions , and Future Directions," in Comparative Management - A Regional View. Cambridge MA: Ballinger Publishing Company. www.tradingeconomics.com .