Liberty University
School of Business
BUSI 604-B05
Dr. Wallace Saunders
July 4th, 2014
Honor Code
I have neither given nor received any assistance on this assignment that has not been disclosed in the document submitted. I have not violated nor observed any violations of the Liberty University Honor Code as it applies to this assignment.
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Abstract
Russia spans 11 times zones and with 147 million people the business opportunities are just as great as the abundance of raw materials and the landmass of the country. Russia is a unique business opportunity and the first thing that needs to be established before thinking of doing business in Russia is an understanding of its people and their diverse culture. Russia’s turbulent past and breakup of the U.S.S.R. along with the switch to a free market and privately held companies have combined making the people of Russia complicated and cultural diverse. Understanding how these cultural diversities allow for international business to be more successful inside of Russia will allow for the expansion of business and the creation of opportunity for those willing to understand Russian culture. Russia is in a unique position to allow for foreign investment to help grow and stabilize their economy and grow their relationships with foreign countries and investors. It is the investors and businesses responsibility to understand and accept the cultural differences that are encountered during the commission of international business. Keywords: dimensions, culture, business, differences,
Global Business Cultural Analysis: Russia Globalization has brought cultural awareness to a new level, instead of diminishing the need for cultural knowledge it has increased the rate by which we have to acquire and understand cultural dimensions. Knowing who you are doing business with is half the battle. The cultural differences that are encountered in international business has come to the forefront of international business as the world has grown. As companies expand into different region of the world they are having to adapt to the doing business by the locals rules. Russia presents itself as a great opportunity for those willing to venture into a growing economy and with the patience to understand the cultural differences to make international businesses successful. To be ultimately successful in Russia a company must know these cultural differences and be able to adapt while respecting the culture. Developing a plan to know the culture and also a plan by which to work with these cultural differences will enable a company to have the best possible business success within Russia.
What are the Major Elements and Dimensions of Culture in this Region? The modern Russia that we know today was developed through thousands of years of authoritative rule. The culture of the Russian people has been developed through what has seems to be the on-going crisis’s that are known as Russian history.
Russian History Lenin and the Bolshevik Revolution (1917) The end of World War I marked a poignant time in Russia’s history, Tsar Nicholas II had ruled the country since 1894 and seen the country through the development of parliament and the revolution. The end of the war had proven to the people that the country was lacking true leadership, the country failed when it came to equipping and supplying its military forces. At the same time this lack of industry brought the large cities on the brink of famine. The call by the workers for revolution removed Tsar Nicholas II from power and replaced it with the Bolshevik party led by Vladimir Lenin. Lenin and the Military Revolution Committee stormed the Winter Palace in October completing the power takeover by the Bolsheviks and creating a proletarian dictatorship. Lenin brought about the New Economic policy in 1921 which developed a partially market run and partially nationalized. Lenin was one of the first to stipulate a one party principle of government rule. Joseph Stalin and the Formation of the U.S.S.R. After the formation of the Union of Soviet Socialist Republics known as the Soviet Union or the U.S.S.R. and then the rule of Joseph Stalin the Russian or Soviet culture developed through the nationalization of all aspects of Soviet culture. This nationalization was even seen in the art work that was done in the Soviet Union which was also unionized by the government. This nation image is one of the main factors of the current culture and its ideals on modern business. Glasnost
Defined as the policy of “openness”, glasnost changed Russian history. President Mikhail Gorbachev introduced the policy in 1989 which opened the closed culture and the controlled dissemination of information from the government. This policy of openness almost immediately showed the people of the Soviet Union how much information was being kept from them by the government. The facts that came out about the history showed that the Soviet Union was ruled by murderous tyrants which has led to trust issues by the people (Graham, 2014). Perestroika The Russian economy had been nearly stagnant for almost two decades and another policy of President Mikhail Gorbachev was developed for the restructuring of the economy to make it a more efficient system. Perestroika as a policy failed to the government propaganda machine telling the public things were improving even as there was a shortage of the basic necessities of life. The mistrust of the government is what led up to the eventually demise of the U.S.S.R. and
Russia’s Ethics Due to Russians political system Russian ethics differ from many western cultures. For one the Russian culture was isolated for many years and then through 70 of communism. Secondly Russia spans so much land mass that it is hard for the Russian people to have organization cultural image, Russia is basically many different cultures with in one.
Russian Values and Attitudes The cultural influences that affect International Joint Ventures can make or break a business opportunity. If a company is not positioning itself to make sure that these differences are mitigated and dealt with they are destined to fail due to a lack of communication of values (Kobernyuk, Stiles, & Ellson, 2014). This communication of values is a major challenge that involves “authority, reporting, and decision-making styles” (Butler, 2010). While values explain and predict practices and behavior, the casual observer may observe differing practices but they may have meaning to those whose cultural beliefs differ from the perception of outside observers (Hofstede, Ohayv, Neuijen, & Sanders, 1990). Traditional Russians The values of “traditional Russians” tend to hold traditional values such as family security and honoring parents highly. This group also scored highly in curiosity, openness to change. The differences in this group tend to be seen in the differences in age (Kobernyuk, Stiles, & Ellson, 2014). Change Seekers The “change seekers” rank wealth including self-enhancement, and egoistic value, an exciting life and varied life or openness to change. This group followed the younger Russians who grew up in the emerging economy following the change from communism (Kobernyuk, Stiles, & Ellson, 2014). Power Seekers The power seekers of Russian culture tend to be those that rank three values consistently higher, authority, influence, and equality. This group was separated more by age and the value of authority. Business graduates with a knowledge of social networking valued influence more highly than others (Kobernyuk, Stiles, & Ellson, 2014). Altruists The altruists of the Russian culture tens to see the world in a more positive light. The values of this group rate self-discipline, social justice, and world peace highly on their values chart. These values are traditionally ranked higher by females, with the value of self-discipline increasing with age (Kobernyuk, Stiles, & Ellson, 2014).
Education
Education in Russia was not geared towards the individual but what the individual could contribute to the whole of the Russia collective. Russian is a 100 percent literate country which is amazing but it also prides itself on the collective education system.
Social Structure and Organization Understanding Three Assumptions about Work The culture of Russia can be seen in its attitudes and assumptions of work. A study by Alan Wilkins suggests that business culture is best understood using three sets of assumptions. First determine what work means. Second determine what is the ends of work and third evaluate what are the work rewards. Between two cultures the meaning of work can differ dramatically which can lead to conflict within the organization if the mission of the organization is not meeting all of the employees involved (Barnes, Crook, Koybaeva, & Stafford, 1997). What work means in Russia can be described through the connections between six characteristics, internal political hierarchy orientation, National pride, blat, value of mutual protection, price fixing, and disregarding of laws/regulation perceived as senseless (Barnes, Crook, Koybaeva, & Stafford, 1997).
How are these elements and dimensions integrated by locals conducting business in the nation?
Organizational structure
Foreign Leadership- Russian Control Many of these cultural element and dimensions can be seen tin the organization structure of a business.
Business as a Common Language Even with all the cultural difference the globalization of the international economic market has led to business, and economics being a universal language.
Develop patience and perseverance
Find a partner you can trust
Cultivate Good Will
How do both of the above items compare with US culture and business?
Russia’s new market compared to The United States When comparing business culture between Russian and the United States the best way is to use Hofstede’s cultural dimensions. This dimensions are used to measure how behavior is dictated by the cultural and personal beliefs.
Hofstede’s Cultural Dimensions Using the five dimensions of national culture that were developed by Hofstede, the behavior of a culture to solve certain issues can not only defined but also can be used to determine the differences between cultures. The five dimensions that are measured are uncertainty avoidance, individualism-collectivism, power-distance, paternalism, and masculinity-femininity. The study that was used to give the following measurements of cultural dimensions used 250 respondents in Russia, who most all were managers and professionals, and who most had college degrees with most of them being college faculty and or students of business colleges (Naumov & Puffer, 2000).
Uncertainty avoidance The definition of uncertainty avoidance is defined by Hofstede “as the degree to which members of a given culture perceive and react to an undefined threat and unknown situations” (Naumov & Puffer, 2000). This dimension calculates how a population reacts to the level of stress for the predictability of rules. This need for predictability of rules lends that cultures with strong uncertainty avoidance tend to have behavior that is unpredictable. The people that use can ignore reality as long as formal structure is provided (Naumov & Puffer, 2000). Russia tends to score very high in this category and were given a score of (68) points. Compared to that of the United States which was 46, this difference in the scores shows the cultural differences and can be directly correlated with how each country tends to be structured when it comes to the relationship between the people and their governments. Russia was known for providing its people with all necessities as long as the contributed for the collective, thus avoiding conflict through following the dictates of the communist system.
Individualism-collectivism
Individualism tends to be predominant where individuals tend to take care for themselves and their own families. Collectivism is used where the group takes precedent of the individual and is the dominate portion of the world’s population. Collectivism is also seen in groups were loyalty to the group is rewarded with protection (Naumov & Puffer, 2000) .
The scores that Russia and the United States scored in this category show the major difference in the two countries cultures. Russia scored a (41) and the United States scored a (91) in the survey. The low score of Russia shows that the country is still in a mode where the group as a collective is still thought of as a major consideration. Whereas the high score of the United States shows how individual success is more accepted and celebrated.
Power distance
This cultural dimension is the level of inequality and equality is seem between the members of a society. While a high ranking in this category generally means that the population as a whole realizes that upward mobility in society is limited. Whereas a low ranking is seen in societies were the individual understands that opportunity and equality exists (Naumov & Puffer, 2000).
The scores in this category are equal with both Russia and the United States recording a score of (40) on the survey. The changes in the Russian culture following the collapse of the U.S.S.R. and the openness after the change to the open market have provided for the change of thought that opportunity exists for self-improvement and for the chance to achieve substantial change in economic status. The score shows that the people pf the two countries generally think that they have the same opportunity to change their social standing and economic condition (Naumov & Puffer, 2000).
Paternalism
When a government has more interaction or taking over the protective functions of a family unit the ranking is said to be high in paternalism. The government in these cases tends to be very involved with the welfare of all members of the society. A low ranking is the understanding that the individual or the family unit is responsible for the welfare of the group (Naumov & Puffer, 2000).
The differences between Russia and the United States are fairly clear when it comes to applying the cultural dimension of paternalism. Russia has relatively just started to have its people become responsible for their own welfare, in the past Russians were under the control of the communist party which provided everything for the people as long as the people worked for the cause of the group and maintained the status quo (Naumov & Puffer, 2000). This is shown with a score for Russia of (59) in the survey. In the United States the individual tends to separate themselves from the government and for a majority of the population realizes that the government does not or should not be providing the needs of the people, the score for the United States shows this correlation with a score of (29) in the survey (Naumov & Puffer, 2000).
Masculinity-femininity
When a society has distinct roles for both men and women and their responsibilities rarely are come together the ranking on this measurement would be high. It is said that when the social roles between men and women have less distinct roles and are often interrelating the score would be low. Society’s views on the roles of men and women dictate behavior by defining the roles of the sexes, by either making the roles very distinct or the blending of the roles (Naumov & Puffer, 2000).
The scores that found in Russia show a score of (55), while The United States has a score of (62), which shows that the United States has a slightly higher degree of using a masculine control and power (Naumov & Puffer, 2000). Russia’s score may be an indicator of how both communism shaped the society by the individual working for the groups cause, in contrast to the individual seeking achievement in the United States. Understanding that Russians may still put the cause of the group before individual achievement will be helpful in business.
What are the implications for US businesses that wish to conduct business in your country?
A SWOT analysis of doing business in Russia
Strengths of Doing Business in Russia
Abundant raw materials
Russia has a huge landmass that is full of natural resources, with approximately 6.6 million square miles which covers one-eighth of the world’s landmass. Russia is the world largest producer of natural gas. (Hamilton, 1994)
Educated low cost workforce
100 percent literacy rate aided in the workforce’s readiness
Enormous market potential
The population of Russia is roughly 157 million,
Weaknesses of Doing Business in Russia
Changing Rules for Western Firms
One of the major problem when doing business with Russia is that fact that the government tends to change the rule and regulations whenever they want causing for a unstable influence through taxation regular business fees (Hamilton, 1994).
Insufficient Supply Channels
The developing economy and the privatization of business and industry has left gaps and holes in the supply chain. In a country with enormous resource sit is often hard to get the raw material with which to manufacturer goods (Hamilton, 1994).
Opportunities of Doing Business in Russia
Large underdeveloped Market
The untapped market in Russia is huge, as the economic scene improves and the standard of living raises for all Russians, the disposable income of the average Russian increases dramatically (Hamilton, 1994).
Threats to Doing Business in Russia
Political instability
The political instability of Russia is a major problem with doing business within Russia. The current situation in Crimea leaves the intentional businesses to be hesitate to invest in an area with possible military conflict.
Corruption and Bribery
If this strategic part of business is overlooked then the entire business then the business may be doomed to fail. The corruption must be dealt with and even if bribes are not paid certain forms of respect must be shown to local and government officials
Understanding the Key Components of Doing Business in Russia
Authoritative, Not Authoritarian
Russians are in need of strong leadership to run successful multinationals within the country. With a history of strong leaders throughout the ages in Russia, competing with such past leader as Peter the Great, and Stalin, it is important to remember that strong leadership is essential to providing both meaning and mission for multinational firms (Fey & Shekshnia, 2011).
Build Organizational Culture with Foreign Elements
The building of a strong organizational culture must be done with clear and sustainable goals that it can achieve. The traditional Russian company in the past suffered from the communism lack or organization structure that presented positive results. In the modern age the building of a competitive company culture includes addressing the Russian culture but also using Western organizational policies that provide structure that Russians desire.
The food company Mars provides a modern structure where the employees are all called associates and each of their input is valued and considered. The company’s organization is clearly foreign but has used that concept to attract modern business professionals in Russia. Whereas in Russia the employee was to do as they were told and not to ask questions, one of Mars most important aspects is its “focus on action and individual responsibility” (Fey & Shekshnia, 2011). Russian professionals are attracted to the company due to its transparent nature and how the company maintains and preserves its culture through making employment at the company a much coveted position (Fey & Shekshnia, 2011).
Create an Empowered Organization
One of the largest challenges of any organization is empowering both the management and the employees to make decisions. The culture of Russian and its history of centralized government and communist control lead to both management and employees to be reluctant to make decisions and to accept their results, mostly due to the past repercussions of mistakes and failures. Successful companies have implemented the empowerment process by having their employees recognize that it is a process and not just a one-time occasion. To do this companies have made the efforts to show employees results that are visible and that could excite the employees. Secondly recognizing that the true change is in the change of culture that needs to be accepted by leadership, the most important aspects of this culture change are the refusal to make decision that have already been delegated and the lenience and acceptance of employees mistakes (Fey & Shekshnia, 2011).
Play own Game, Respect Local Rules
The fact is that Russia is a different type of market and things tend to be different there goes with understanding that there are specific rules for an unusual market. To be truly successful the understanding of the cultural differences between Russia and the United States needs to be fully understood in order to recognize the cultural differences that imped business. But a company while recognizing cultural differences and making some adaptations must also be true to itself and be able to use its own game plan with adaptations to local rules. It is often better to recruit Russians to understand the game plan and then in turn use them to implement company plans (Fey & Shekshnia, 2011).
Major Goals, Minor Details
Looking back on the Russian history of using the five year plan, it is hard to imagine that true long term goals can be implemented within a country known for instability. The use of clear goals and flexibility can be combined with a company’s vison in order to provide for the long term goals to be achieved. Addressing the fact that Russia has a very changeable environment , a company need to be positioned with both a contingency plan and the ability to provide direction for its employees (Fey & Shekshnia, 2011).
Manage Crisis
Russia is the country of crisis, seemingly throughout history coming out of one crisis into another. No matter what the crisis there are several things that need to be addressed in order to successfully see an organization through crisis in a foreign country. Leadership has three roles in handling a crisis, one is seeing the opportunity that the crisis might present, negating the negative consequences of the crisis, and providing a strong, confident leader to follow through the crisis. Change in Russia is inevitable and crisis will be part of the change, being prepared for and accepting crisis as part of the culture readies the international business partner to embrace crisis as part of the business world in Russia (Fey & Shekshnia, 2011).
Corruption is Omnipresent
Corruption is part of every aspect of doing business in Russia. The corruption seen in Russia happens from the top of government down to the lowest local official, it is even said that school teachers will take brides from parents in order to give their children better grades (Fey & Shekshnia, 2011). Understanding the social implications of corruption can aid in the companies develop of a policy on how to deal with the challenges it will face. While corruption can take on many forms a company must be ready to deal with them all.
Cultivate Relationships
The development of relationships are crucial to the success of a business within Russia. It is these relationships that cultivate the trust needed in order for business to flourish or even for international business to happen within the country. The general mistrust that Russians have developed over the years can be overcome if a trusting relationship is developed between business partners (Fey & Shekshnia, 2011). These relationship need to be developed at all levels of business. It is crucial to develop relationships with the government and local officials. Even the lowest level government official can create a crisis. Microsoft solved this in a creative manner, without having to pay any bribes, they developed relationships by including governmental officials and explaining how they would benefit from business with their company. Then the officials would be told of successes and publicly thanked the officials for their help in their success’s (Fey & Shekshnia, 2011). Microsoft went as far to make sure that these relationships were cultivated with people in power by sending such things as birthday cards and making sure that the officials are addressed in the proper manner (Fey & Shekshnia, 2011).
Doing Business in Russia
Doing business in Russia is bound to remain a difficult task for some companies. When doing business in Russia there are many things to take into consideration, First there is the language barrier, but can be overcome as long as cultural form of communication are included in understanding business communications. Go in knowing that the bureaucracy of Russia will inhibit the business in some way. Knowing that Russians are more formal than western business that Russians have a different sense of time, and Russians can often try to put the opposition at a disadvantage in business. Understanding the culture of Russia is essential to doing business in Russia successfully.
References
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