Country Project Presentation Russia

Running head:  COUNTRY PROJECT: RUSSIA

Country Project Russia

Team Russia

Presented in Partial Fulfillment of:

Global Business

Table of Contents

Executive Summary        3

Introduction        5

Country Analysis        6

Political Environment        6

Legal environment        6

Economic environment        6

Monetary environment        6

Trade environment        6

Cultural analysis        6

Proposed Product for Entry        6

Challenges        6

Opportunities        8

Proposed Entry Product        9

Entry Strategy        10

Entry Mode and Distribution        10

Promotion Methods        11

Conclusion        12

1. Executive Summary

Russia’s investment allure is fraught with obstacles and opportunities. Investor confidence has been negatively affected by their perceived political instability. The CEO of Coca-Cola recently shared his opinion that in order for Russia to improve their appeal to investors, they must reduce bureaucracy and address corruption. We agree with this assessment. Excess bureaucracy has created such a lengthy process for business formation that aspiring business owners often resort to bribery simply to start a business. This has caused corruption in all levels of Russian government.

Bureaucracy and corruption are not the only factors that create a negative perception of Russia for foreign investors. The political decisions made by Russian leadership, particularly their annexation of Crimea, have caused a full blown investment crisis that threatens to spiral out of control. Western governments have imposed trade sanctions on Russia, and they have responded in kind. Russia even stands accused of trying to illegally force several existing western owned business into closing, including McDonald’s and Wendy’s. However, many savvy western investors have demonstrated that the perception of foreign investment opportunity in Russia is actually much worse than reality. They cite positive change in cutting bureaucracy and internal corruption, but claim the secretiveness imposed by Russia’s leaders has prevented the vast majority of westerners from seeing that the Russian economy is really “a rare opportunity to buy low-cost assets".

There are certainly challenges in attempting to start a new business in Russia. Of America’s 87 largest trading partners, Russia is 82nd in market receptivity to American products (beating out only Brazil, Egypt, Pakistan, Cuba, and Burma). Russian culture has generated a population that is generally regarded as extremely skeptical and risk adverse. However, their status as the largest nation on the planet make Russia an extremely rewarding place for a product that can overcome the barriers. We believe we have found an opportunity to do so.

In response to economic sanctions imposed by western governments, Russia has banned American and EU imports of food and dairy products. This has led to the unforeseen circumstance that Russia is only capable of meeting about two thirds of its citizen’s demands for milk. While milk is available from some of their Asian neighbors, businesses in those countries struggle to distribute milk throughout Russia before the end of its shelf life. We believe the demand for milk is creating the need for an alternative: soy milk.

Soy milk is able to be stored without refrigeration for extended periods of time. This will allow us to distribute it throughout Russia without wasting our supply to expiration.

As stated previously, Russia has banned the import of food and dairy products from the United States, so we must find a third nation in which to set up a soy milk manufacturing business. The country most suitable to our needs is Belarus. They are on the Southwestern border of Russia, which is near its most densely populated areas. There are also a few established businesses in Belarus which already distribute milk to Russia. Furthermore, Russia is already accustomed to importing goods from Belarus (currently 5.4% of Russian imports are from Belarus), which eliminates any skepticism and risk concerns that may be harbored in Russian culture. If we partner with one of these businesses in a joint venture, we will be able to utilize their experience and knowledge of the Russian market, as well as any brand awareness they have already generated in Russia. We will invest in a building a manufacturing plant, while our partners utilize existing distribution channels and promotion methods to penetrate the market.

This is a truly unique opportunity to penetrate the market of the largest nation on earth while satisfying an existing consumer need. Though there will be challenges along the way, the reward of brand loyalty throughout Russia is well worth the price.)

1. Introduction

For 75 years Russia experienced a Communist rule (a system of complete government ownership). With the fall of the Soviet Union in the 1980s, Russia faced a major economic reform. The transition for Russia into a free-market economy has been challenging. While the Russian people now have the freedom to speak their minds, those that were not in high ranking positions in the government and business before the fall (mainly "blue collar workers") are having trouble maintaining the standard of living they were accustomed to under the communist rule. They aren't able to afford some basic items that were once affordable during that period of time. Since the fall of the Soviet Union, Russia is still experiencing challenges to growth. They face political instability, corruption, an unstable investment climate, shifting business laws and an opaque legal system. Some of these challenges carried over from that communist era and it has drastically deterred the growth potential of Russia. However, despite these challenges Russia has seen some growth. While still an emerging market in so many areas, Russia has made significant growth in the industrial market. Russia has become a leading supplier of Petroleum products. The European Union has become dependent on Russian petroleum. Russia conducts trade with many different countries but the top 6 import/export countries are China, Germany, Ukraine, Belarus, Japan and The Netherlands.