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Analysis

From Russia with profits

This week's Irish trade delegation to Moscow learned that the Russians have a very different way of doing business. Paul Melia reports

Saturday September 11 2010

Every country has its own way of doing business. In Japan, the chief executive of company A meets the boss of company B, they have tea and polite conversation, before agreeing to work with each other. In Ireland, deals are struck in offices before the finer details are worked out on the golf course.

In Russia, it's rather different. They like the human touch. Company directors won't just meet other executives -- they expect to be introduced to the movers and shakers in government before signing along the dotted line.

One company told the Irish Independent their Russian partner was so upset that the Irish wouldn't play ball that they failed to show at a networking dinner last Tuesday that was attended by no less than our Head of State.

"One of our partners wouldn't come here today because he wanted to have a private dinner with the President McAleese," the Irish company boss said, adding: "That's the kind of stuff you have to deal with here."

President McAleese and Minister for Trade and Commerce Billy Kelleher were in the Russian Federation this week to help Irish companies that are keen to export and work in the former Soviet bloc.

The 30 firms which travelled to Moscow and St Petersburg will certainly need their help. Doing business in Russia is different from back home.

In the space of just two decades, Russia has moved from being a depressed communist state to an economic powerhouse. The opportunities are huge and Irish companies working in telecommunications, food and property development are keen to cash in.

Every aspect of the trade mission had been vetted in advance by the Russian government and Moscow police closed off the streets to allow the presidential motorcade to move around the city.

Traffic was at a standstill for millions of commuters as the presidential Mercedes swept through the wide empty streets, with some drivers angrily honking their horns in protest.

"Streets are still closed for some [government] ministers attending important meetings, so the horns are not a greeting," one Russian said.

Journalists were told where to stand and when to move at official functions. Moving out of place was not an option. Asked what would happen if reporters failed to obey orders, one Russian security guard cheerfully answered: "You would be shot, ha ha."

Each moment of the five-day visit was taken up with selling Ireland, extolling our cultural links and making every effort to assist companies looking for new markets.

We had invested in education, Mrs McAleese told audiences including the mayor of Moscow, President Dimitry Medvedev and the Russian Forum on Nanotechnology, which invests in companies working at the cutting edge of new technologies.

We were ready and willing to work, she added, and had the capability to meet the demands of our Russian partners. She wasn't selling an empty promise. Irish companies have been based in Russia since 2003 and some 200 currently have a presence.

We're now the eighth-biggest investor in the former Soviet Union.

Every year, €2bn worth of trade goes back and forth between the two nations. The plan for this mission is to grow that.

But the Russian Federation is not like other places and any business planning a move will have to adapt to succeed. It's not going to be easy.

Indigenous firms look around the world to source the best products and Irish companies will have to be at the top of their game to win what are very lucrative contracts.

Having someone on the ground, who speaks Russian, is essential.

"To be honest, the biggest weakness I've had is not being able to speak Russian," says Declan O'Sullivan, general manager of Mercury Engineering which is based in Moscow.

A Cork company, it moved east in 2003 and builds data centres and fits out office space in new developments. It employs 400 people, of which just 25 are ex-pats.

"I think when you're getting into deal with Russian clients -- and a lot of the multinationals have Russians employed -- it's easier for them to communicate.

"When you get into very detailed discussions, particularly on technical details, it can be very difficult.

"In 2003, it wasn't tough to break into the market. There have been ups and downs. The hardest year was 2009 because all the projects in the pipeline were frozen. We didn't have a disastrous year, but it wasn't a good year."

Declan McGuinness is with Openjaw Technologies, a company which provides airlines with computer software allowing customers to purchase flights, accommodation and other holiday necessities online. It entered the market in 2007 and has spent the past three years building contacts.

"Russian companies look outside the market," he says. "Appointing a representative is key. This is somebody that knows the airlines and has contacts, and we're starting to see the fruits of that now. In the last year, I've made five trips to do pitches and meet people.

"It's a very mixed market but there's lot of opportunities. There's a strong opportunity to win new business but it needs investment and time."

State agency Enterprise Ireland, which helps businesses moving east, says in its guide to Russia that while most business is done in the office, "it is customary to conduct some business in a social atmosphere late in the day or outside working hours. This might be in a restaurant or club."

Companies will need deep pockets. Moscow is ridiculously expensive.

The exchange rate is €1 for 40 roubles and nothing comes cheap. In the five-star Moscow hotel where Irish delegation stayed, a bowl of corn flakes is 340 roubles -- more than €8.

A yoghurt was €7. Ice cream €12. A mozzarella and tomato salad €25. Steak and chips almost €50. Even a beverage is dear. A coffee is €9. A bottle of Heineken €9.50. Why drink wine when strawberry juice is available? A snip at only €32.50 for a 250ml glass. The only things that are cheap are cigarettes at €1 a pack.

"A lot of these markets are very expensive, so you need to know what to expect," one industry source said.

"Have business cards in Russian. Local representation is so important. You might not be able to get into a building unless you speak Russian.

"Russia a very hierarchical society, so you need to be talking to the right people. It demands a commitment. Companies do feel uncertain and having some preparation helps them."

Brian Collins, chief executive of Adaptive Mobile, has developed a technology which allows parents to control their child's mobile phone usage by blocking certain sites and only allowing calls at certain times to particular numbers.

"This is our first win here," he says. "The market is just so big here. You have to have a partner, but we're assisted. There's can be pretty stiff bureaucracy. You have to get the processes right or you're just not entertained."

But help is at hand. Enterprise Ireland runs an International Selling Programme with DIT in Dublin which helps companies moving to new markets, including Russia.

"Preparation and strategic planning are key to realising export potential in Russia," chief executive Frank Ryan says.

"Trade missions such as this one are important but there is a range of other important strategic and business development supports that clients use to evaluate and realise opportunities."

Knowing the market, and how to behave, will dictate how well Irish businesses do there. The real test of whether we have a smart economy is now.

Irish Independent

 
 

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