International Trade/Offshore Manufacturing/Sourcing/Export/Import/Consulting The Humor of Business in Russia By Annabella Fitch Hutton Russians are not Americans who speak and write in an unintelligible way. They have their own way of doing business, born out of centuries of their own distinct cultural and economic development, only slightly modified by the Soviet era. They are a proud people who have suffered much in this century and are bursting out of the Communist mindset, fragmented, but buoyed by their own sense of humor. Being able to appreciate humor, to laugh and tell jokes is a useful attribute for people wishing to do business with the Russians. They love anecdotes, and often tell stories against themselves. One goes like this: A Russian died and went to hell. There he was given the choice between the Russian and the American Hell. He immediately chose the Russian Hell. "Why," he was asked. He replied, "In the Russian Hell, when there is wood, there will be no matches, and, when there are matches, there will be no wood." The old USSR or Soviet Union, of which Russia was but one of 15 states, covered an enormous land mass from the Baltic to the Pacific, the tundra in the north and the hot deserts in the south. A new generation of business people, entrepreneurs in their 20s and 30s, has emerged. These people are extraordinarily adaptable and able to react quickly to opportunities and hardships not imaginable in the U.S. For example, over a period of six weeks, a mayonnaise manufacturer was given one month's notice to quit the factory. Their supply of hard currency for supplies was cut off, as was their water. The entrepreneur solved each problem calmly in a very "Russian" way, and continued to manufacture mayonnaise. Knowing how to work the system is an absolute necessity if you want to survive and thrive. For the foreign entrepreneur, who has not grown up under the old bureaucracy and does not have the know-how to work the system to their advantage, a local partner is a necessity. The bureaucracy can still be incredibly complex and capricious, introducing and withdrawing new regulations overnight; the lowest level clerk can block your progress at a whim. Selling to Russians Selling to the Russians is the same as anywhere - in principle. You have to find customers who want your products and can pay for them. The top shops in the big cities contain many American goods. The kiosks are full of Western products. Coca-Cola is everywhere and McDonalds are springing up in most major cities. However, there are few American cars, tractors or refrigerators anywhere, and even fewer out in the rural villages where there is little money. As in former times, Moscow is virtually a separate, rich country. There is the story of the Muscovite who met his friend in a bar wearing his new leather jacket. He proudly related he had spent $1,800 buying it. "You should have spoken to me first," replied his friend, "I could have got it for $2,800 for you!" Collecting Data and Information In general, official government information and statistics are expensive and unreliable. In former times, the "right" answer was much more important than the truth, and forecasts were dominated by wishful thinking. Change is now so rapid that the numbers cannot keep up. If you want to know how things are there, you will have to go, find a partner locally, do trials and find out for yourself. It is an intensely entrepreneurial atmosphere, with potential for making a lot of money or losing your shirt overnight. In the past, manufacturing was controlled from Moscow, as the center of the planned economy. Huge factories were built to supply the whole of the Soviet Union. These factories existed to provide the goods needed by the people, but even more importantly, they existed to provide jobs for the people. This was the prime motivation in the organization of the production, marketing and transportation of the goods. They existed in isolation from their markets, not considering it necessary to seek out new markets, having no control over costs of raw materials, or production costs, and having little interest in who bought from them or why. A Western consultant discovered that a refrigerator manufacturer had no idea what happened to the fridges that he made once they left his factory, and he was unable to explain why fridges did not sell at the same rate all year round! Market Research and Analysis U.S. companies undertake a great deal of market analysis, research and development, and design work. Many new products are costed but only a few reach production. It is common to work with clients for six to 12 months from initial inquiry to an order. Businesses are well aware that not every inquiry that they work on will lead to an order. In the former Soviet Union, the situation was very different. The old way was to fully work out the technology and design for a product before taking it to the factories for costing and implementation. There was always a ready buyer, the Soviet Union. Russian companies are not used to quick, competitive quoting. Nor are they used to the concept that they will win only a small proportion of the work for which they quote. They are disappointed and confused when an inquiry does not turn quickly and automatically into a (large) order. In a Western factory, it is not expected that a customer will interfere in the process of production. In the former USSR, there are now some world class private companies, but even in these a Western customer needs to keep a constant check on operations, using local staff that work for them. This is not considered unacceptable by the Russian counterpart. Attempting to work with the state companies is much harder. Most are strangled by their bureaucracy; there are no rewards for enterprise, only punishment for mistakes. A $20 purchase can stop production for days, waiting for a decision at top level. Sales and Marketing The biggest differences are in the treatment of customers and in the speed of work. In the West, the customer is king or queen. Fail to please the paying customer and you go out of business. It is common knowledge that sales people in the USSR could be aggressive and rude. That can still be the case. The disappearance of the Soviet trading companies means that manufacturing companies now have to deal with customers direct. Some have adapted well (for example, in the clothing industry), but many sales departments are so used to being able to allocate capacity to grateful consumers that they have still not learned the importance of treating the customer well. The majority of businesses from Western countries manufacturing goods in the former USSR do so by shipping in the materials and design. They use the underemployed labor and equipment from the USSR to make Western products, which are then shipped back to home countries. In fact, some of these items could also be sold into the wealthier areas of Russia at good profit, as these items would avoid import duties, but be of Western design and appeal. Also import/export companies could look profitably at some Russian designed and manufactured goods that are potentially saleable in America (for example, ladies' outer and underwear, ethnic giftware). Trading with Russia and its former states can be profitable and enjoyable if you adapt to their fast-developing ways, and take account of history and culture in understanding how to communicate. Individually, most Russians are generous, hospitable and full of fun. In business, you will probably find they will not conform to standard international norms, but they all understand that as in the old Russian proverb, the only free cheese is in a mousetrap! When this article was first published, Annabella Fitch Hutton was with The British Connection Inc. in Atlanta, a company involved in travel, marketing and trading, offering opportunities to U.S. companies interested in trading with Eastern Eruopean countries. Advertise on this site Put your company on this site!