International Management in Action: The Political, legal and Technological Envir

Question

International Management in Action: The Political, legal and Technological Environment

Business Report - Delaying Entry into Russia Market

Doing business overseas cannot happen without learning about and trying to understand the customs, cultures, and work habits of people in other countries. Equally effective management styles must be developed. The example of Russia follows. Russia is moving from a central to a market economy, and management is changing along with that new direction. The United States and Russia interpret “partnerships” differently. Management in Russia is more authoritarian than that of the United States; the chain of command, responsibility, communication, and the decision-making process are all affected by this difference in management style. Looking back at history and incorporating the evolutionary knowledge can aid the understanding of emerging economies.

Assignment

Create a two-to-three page business report as you would submit to your CEO of why you feel a planned entry of the company "Happy Hamburger" into the Russian market should not be rushed. The executive team has decided to go full steam ahead, but you see pitfalls in hurrying this move.

State your reasons, with facts to back them up. This means citing your sources. This U.S. - Russia Business Council website , may be of some help, but also use your text book. Your personal opinion does not count.

Do not write as you speak, remember this is a report, designed to persuade the CEO to hold off. This is not a reflection paper or a letter.

Discuss political, legal and technological aspects of market entry and consider the following in your response as well: Act of state doctrine, Doctrine of comity, Foreign Corrupt Practices Act (FCPA)

Explanation / Answer

To: The Ceo, Happy Hamburger

From: XYZ

Dated: March 6, 2018

Subject: Recommended delay in entering the Russian Market

Sir, as discussed in the previous meeting I will like to submit my recommendation on reasons for not in favor of “Happy Hamburger” entering the Russian Market immediately.

I will start by discussing my study on the macro environmental factors which are not in favor of entering the Russian market currently. I will further highlight the disadvantages in Political, Economic, social, Technological, legal, environmental issues which are not in favor of new Russian market. I will also explain my perspective and study of the local cultural and geographical issues not in our favor.

Let me start by giving an analysis of the PESTEL factors impacting entry of “ Happy Hamburger”

Political Factors: The country is governed by policies of annexation, sanctions, and import barriers; it’s the 40th country in ranking to invest in the world. The falling oil prices have pushed the country into a negative scenario.

Economic factors: Economic structural weaknesses exist and its conflict with Ukraine has led to economic down trends in 2014-15. It has highest per capita income but has a poor business environment for US-based companies. The GDP of the country is one of the highest in the world ranking 13th in 2015 but fell from 3.7% to 0.6% in 2016. The World Bank though estimated 1.1% and 1.2% for 2017 and 2018 growth respectively due to an expected increase in oil prices.

Though they are looking at forming a union for free trade with its neighbors namely Kazakhstan, Belarus, Armenia, and Kyrgyzstan it is still in initial stages and we can wait till these are formalized making it a bigger market size for us to target.

Social Factors: The language barrier and local communication will be a limiting factor as we are unable to freely communicate, most people even younger generation have limited use of English. The country promotes import substitutes as it has a huge problem of foreign exchange. The need for the good business partnership will a long-term perspective will be required which I think we need to study and shortlist before entering the country. Bribery is rampant. The crime rate is high and organized planned rime. There are also a lot of terrorist threats.

Technological: The technology and the country are still dominated and managed as a military country. All business is carefully scrutinized. The political surveillance is continuous. Phone calls are tapped and video recording is done, strangers are a scene with skepticism and suspicion. Interception of emails, faxes, phone calls is common. This can create a huge problem if data of our organization is leaked to our competitors.

IP has to be taken internationally and is not followed in Russia, duplication, and copying is a common threat.

Environment: There are concrete sustainability regulations.

Legal: The local laws can be followed by only by bribing its 177 most corrupt country in the world, it follows all corrupt practices. Our organization which is ethical in its business behavior will be unable to handle the rules.

To sum it up the country though appears a good business opportunity but when studied in depth especially the political, economic, and business scenario creates an unviable business proposition.

My recommendation is to study market scenario in detail and then take our entry in a slow and steady manner.

Reference

Overseas Business risk-Russia

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