Russia Cultural and Economic Analysis

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Cultural Analysis

History

Russia is a country with a very rich and diverse history. In its history, it has experienced

numerous types of government and has witness many wars and other problems. The first major

political entity was created in Kiev in the year 962 and lasted several centuries. By the 10th

century, Christianity had expanded to become the state religion through the creation of the

Russian Orthodox Church. However, this new Russian states disintegrated with the Mongol

Invasion in the mid-12th century.

Russian rulers came back to power in the 15th Century under Ivan the Terrible. He was the first

to call himself Tsar, meaning Caesar in Old Russian. From this time, up until the First World

War, Russias government was an autocracy, under the tsars. The Russian Revolution, in 1905,

forced Tsar Nicholas II to introduce limited democratic reforms for the Russian people. By the

time of 1917, years of peasant unrest and anger handling and death toll of WWI resulted in the

Russian Civil War. The Revolt resulted in the start of communism, under Vladimir Lennon.

Under communist control, Russia rapidly expanded its borders into neighboring states,

becoming the Soviet Union. When Joseph Stalin came to power in the early 20th century, his

reign was marked with a rapid increase in Soviet world power. However, his rule was marked

with mass genocide, severe poverty and famine for his people. During World War Two, 20

million Soviets died. This was by far more than any other country in the war. After the war, The

Soviet Union would become one of the two world super powers, along with the United States.

Tensions soon grew between the two countries resulting in the Cold War arms race. By 1991, the

declining Soviet Union economy experienced economic collapse and the split up of the Soviet

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states. From there, the Russian Federation was created. The Russian Federation promises more

freedom, economic stability, and democratic process than Soviet Union. However, in a March 5,

2012 article by CBS News, entitled Thousands of Russians challenge Putin's election, Putin is

said to have won the election unfairly through massive voter fraud. It is very important to look

into the history of Russia. It has undergone many forms of government and is clearly still

unstable after its latest change in government. Despite this instability, history shows that, after

changing to a more democratic and free market government, countries can go through periods of

rapid growth. This is something to watch for in the future.

Geography

Geography is very important when trying to market to other countries. One of the basic

things, that a marketer must look at, is how are we going to transport and distribute products to

and in our host country. Russia poses a unique challenge to the international marketer, due to its

massive size. Russia is 16,377,742 square miles, making it the largest country in the world.

Because it is so large, this could pose a problem when trying to distribute a product. But it isnt

just the sheer size that could challenge the distribution of a product, Russia is also known for its

vastly different and often harsh climates. The country also has a challenging topography and a

difficult location. Due to its massive size, Russia can be very different depending on your

location.

Russia is located in Eastern Europe and Northern Asia and is surrounded by members of

the former Soviet Union (Azerbaijan, Belarus, Estonia, Georgia, Kazakhstan, Latvia, Lithuania,

and Ukraine) as well as Norway, China, Finland, North Korea, and Mongolia. Due to its northern

location, it is out of the way of many major sea lanes. In northern areas, ports can also freeze

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over during the winter making it harder to get products into the country by sea. And being

surrounded by so many countries, many of whom may be unfriendly to either the United States

or Russia, shipping by land may also be difficult.

Russias climate may also play a factor into the decisions of an international marketer. The

climate of Russia varies depending on where you are. In Siberia, Russia is subarctic and in more

northern regions, a tundra. While in European Russia, they experience warmer, more humid

conditions. A product that is needed or desired in one area of the country may not be needed or

desired in another. A product that is useful in one area, many not hold up in other areas of Russia

due to, for example, the Russian winters. It is important to know where and when our products

may be needed in the country the most.

The Russian topography is also important for marketers to known when looking at

Russia. Russia ranges from very mountainous regions (Mount Elbrus is Europes highest peak)

to steppes and low laying hills. Many areas are also dense forests. Despites its massive size,

Russian agriculture is not very successful due to poor climates and soil. However, the country

does have massive amounts of natural resources. Timber, oil, natural gas, coal, and other rare

natural resources are found in Russia. The downside is these resources are often hard to get too

due to distance, climate, and the tough landscape of the nation. Mountainous and isolated regions

may be markets that pose a challenge to marketers.

Social Institutions

Family

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In Russia, the most important part of the family unit is the nuclear family. Most new couples

want an apartment of their own, separate from their parents. Currently, Russia is feeling the

effect of a housing shortage and high cost of housing. Some houses may contain three

generations. Many couples live with their children and their widowed parent. Typically, it is their

mother, which helps provide aid with child care and preparing meals. The grandparents pension

can help contribute to income brought in the home, while they live there. In terms of marriage, a

romantic connection is considered the most acceptable reason and motivation for marriage.

People typically meet at school, universities or at work, although social settings are becoming

increasingly popular. Premarital sex is accepted and unplanned pregnancies are not uncommon.

Twenty-three is the average age of marriage. Ninety-Seven percent marry before the age of forty

and most of that percentage is before thirty. About half of the marriages end in divorce, primarily

to economic problems or causes from alcohol abuse. The views of gender roles are stereotypical.

In Russia, the men are patriarchal with stern leadership, physical strength, bravery and

rationality. Women are known for their beauty, instinct, emotional depth and selflessness. They

are held in high regard as the mothers and nurturers. This is different from the original

communist state that Russia was in. During this time, women were encouraged to take on typical

male roles such as operating machinery, working in constructions and maintaining railroads and

railbeds. Also, women began to progress in sciences. Since the 1990s, this idea has receded.

Women were the first to be laid off in management jobs during a switch in government and the

hard economy. The politically held offices used to be one third female but they have also

declined. Now, they are being lured into prostitution because the money is easy and fitting for

the hard economy Russia faced and continues to face (Ember, Countries and their Cultures).

Education

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When children are very young, from the moment they are born to about 7 years old, they are

immersed in nurseries and preschools that teach them communal responsibility and proper social

behavior. This is valued over developing creativity. The standardization of the school curriculum

is very important. These are formed by centralized federal committees to ensure everyone is

learning the same things. Their academic standards are high and they are well trained in history,

language, music, math and science. When it was the USSR, they emphasized multiethnic

country. Now, the focus is nationalism and their achievements in arts and sciences. Girls are

taught to be quiet, friendly and supportive while the boys are taught to be noisy, boisterous and

competitive. School is ritualized, starting with the first day of school to graduation. Children

typically do not move around schools a lot because they have the idea of building friendships

with classmates that continue well on into their adulthood. About ninety percent of the

population has completed secondary education. When Russia was the Soviet Union, it had world

class higher education available. Many universities and institutions specializing in academic,

scientific, professional, and technical areas. Business schools have only started to develop since

1991. Only about twelve percent of the population has completed higher education. Higher

education is perceived as a mark of social prestige and regarded as an imperative to have

economic success in the future. Ninety-nine percent of the adult population can read. This has

begun to decline as the country becomes more ethnically diverse (Ember, Countries and their

Cultures).

Political System:

From the years 1991 to 1999, under Boris Yeltsin, the reorganization of the political structure

and its roles were disputed. Finding the balance between the president and parliament as well at

the central and regional powers has changed. A constitution was approved in 1993 that provided

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the country with three branches: the executive, legislative and the judicial (Ember, Countries and

their Cultures). Parliament, or the legislature, is divided into an upper house, the Federal

Council, and lower house, State Duma. The lower house contains 450 elected members, while

the upper house consists of local governors and legislators from a range of eighty-three regions.

The President appoints the Prime Minister which must be approved by the Duma. Recently,

when Vladimir Putin took control, he replaced the governors with centrally appointed members

which allow the president more control over the house. There are over 25 registered political

parties, but only five major ones. There has been a history of political fragmentation and the

coalitions between them have been unstable. The main political party is United Russia, which the

current president, Vladimir Putin, is under. United Russia is a consolidation between the Unity

Party and the Fatherland Party. Other popular parties include the Communist Party of the

Russian Federation and the Liberal Democratic Party of Russia (Banks,Political Handbook of

the World). Law enforcement is weak and corrupt because of the close ties with the mafia. They

have heavy influence in the local politics and national politics. Even though Russia has taxes,

there a lot of grey areas due to the corrupt nature of their government. According to an article

published in March of 2011 by Russia Briefing, tax avoidance in Russia was for years widely

perceived as appropriate behavior. Russia has created a tax police to help collect the taxes as

well as monitor whether people are being accurate about the amount on their reports. This is still

not being effective in collecting taxes. Local courts are established in all of the eighty-three

administrative units in the Russian Federation. These courts make the initial decision on criminal

and civil cases. The next level of the judicial system is the Federal district courts(Ember,

Countries and their Cultures) .

Legal System

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The judiciary system is underfunded, overwhelmed by many cases and corrupt; therefore,

society is having a hard time dealing with the conditions. Most people will not appeal the law

because it is too much of a hassle. Russia is based on civil law, which means that they are

constantly updated to adhere to the times. It consists of the Constitutional Court, courts of

general jurisdiction, military courts, and arbitrage courts which are for commercial disputes. The

Constitutional Court arbitrates disputes between the legislative and executive branches, as well

as region and local governments. They also handle violations of constitutional rights, appeals,

and impeachment proceedings. In 2001, they passed a Criminal Procedure Code which makes

their judicial system more similar to the western and more democratic style of law (Background

note: Russia).

Social Organizations

Throughout history, Russians have followed a communal mentality. This means that their

personal business is shared with everyone else. Russia can be classified as a high text culture

which is the supports the idea of collectivism. Since the reconstruction of their social structure,

ideology or your political party does not affect your social status as much. During the Soviet

Union, belonging to the Communist Party was essential to career advancement and prosperity. In

their Communist state, the economy was poor which made social mobility limited. Post-

communist society was still left with a wide gap in wealth and privilege. Their upper class, the

nomenklatura, has continued to grow their bank accounts through industry and finance. A lot of

their income also comes from private property, which was prohibited by the communist regime.

This social class participates in conspicuous consumption by purchasing lavish goods to flash

their wealth. The true measurements of their society are hard to measure due to nonreporting.

Several reports have given mixed percentages regarding marital status and income. The hazy

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perception on what these terms include is what the basis of the political parties are formed under.

The subclass of young business people have helped adopt the capitalistic way of life while

Russias older generation are more rigid and less likely to adapt. The definition of the working

class and peasants has taken a drastic change since the adoption of capitalism. More goods are

available in the country, but the current wages being paid are not sufficient enough to pay for

recreational interest. The working poor struggle with agriculture, education, culture, science,

and health. State employees are feeling the crunch from wage adjustments. The working poor

consist usually of single parents or of families of one or more children. The younger culture of

the tusovki has made western customs more main stream in the adjusting Russia. They are

small social circles that provide and sense of identity compared to the rest of Russian society

(Curtis,Russia: A Country Study). They take risk and adopt different fads. Russia does not

contain much diversity but it has increased over the years. According to the CIA World

Factbook, 79.8% of the people from Russia are Russian, 3.8% are Tatar, 2% Ukainian, 1.2%

Bashkir, 1.2% are Chuvash and 12.1% are other or unspecified.

Business customs and practices

Russians take personal relationship seriously when approaching a business deal.

Networking and extended relationships are essential to closing negotiations. Another factor in

the business work is the constant changing of their laws. They are often being rewritten and

fluctuating due to political forces. Deals must be based on trust and stern agreements. Even

though these do not seem desirable in markets, Russia has a high-growth market with many

opportunities in many fields such as banking, finance, technology, infrastructure and education.

Their management style is autocratic and the top-management makes the decisions with very

little concerning the middle managers. Also, there are few women in high level management

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positions. Economic crime, corruption and bribe taking are common practices for many citizens

and officials. They are illegal but rarely prosecuted. Extortion through the idea of protection is

a way of life in Russia. Many businesses are financed through the mafia and they have infiltrated

most of the industries. They own about seventy percent of the banks and have a part in raw

material exports. They are known to organize killings on political leaders, business people, and

journalist (Doing Business in Russia).

Religion and aesthetics

Religion and other belief systems:

During the Soviet rule, scientific atheism was promoted and all religious practice and

identification was repressed (Embar). Copious amounts of religious buildings and sacred objects

were destroyed and forbidden. The more recent restoration by the state of those structures and

freedom of religion has led to the ample religious identification among Russians again. The

Russian Orthodox is the dominant religion in the country. Other prominent religions in the

country of Russia are Islam, Buddhism, and Judaism. Due to the harsh conditions during the

Soviet time where religion was not allowed, many Russians do not actively practice their

religions (Embar). The vast majority of those who would consider themselves Russian Orthodox

believers do not appear in church regularly. Although the majority of the people do not attend

church, observance of key holidays are still very important to them. Easter is the most popular

religious festivals celebrated in Russia. Islam is the second largest religion in Russia, as the bulk

of mosques are located in the countrys capital, Moscow. Buddhism is the primary language of

the ethnic groups Buryats, Kalmyks, and Tuvans. Similar to the Orthodox religion, Buddhists

were harshly persecuted under the rule of Joseph Stalin and temples were also destroyed. As the

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religion slowly is being restored, many are going back to being practitioners of Buddhism.

Lamas are the most important spiritual leaders and teachers of this religion.

Religion is a huge issue for the country of Russia. As someone entering this previously

communist run country, you need to be aware of the instability that is occurring. So much was

taken from these citizens that only now are they starting to gain back their freedoms. Religion

has a great influence on the citizens of a country and especially if they are just starting to become

believers again. It is helpful to understand their viewpoints on things and understand that most

are not used to routinely practicing their faith, even though they still believe.

Aesthetics:

Russias culture is focused predominantly around visual arts, folk music and dance.

Russia has contributed too many famous people known around the world dealing with the arts.

The state, especially during Soviet rule, largely supports the arts in Russia (wikipedia. Russia). A

major reason why this support became so huge was because the Soviet government viewed it as a

perfect way to us media to promote their political ideologies. During this time of rule in Russia,

the state held great priority in setting up institutions that would further promote the importance

of music, theater, and dance to their citizens. The Russian Academy of Arts, the Composers

Union and the Writers Union were just a few services that federal funding was provided to

(Wikipedia. Sports). Tickets were even subsidized to make them inexpensive and to create a

large demand to attend. Since there was such a great emphasis put on the arts, it has become a

huge part of the Russian culture still today. The performing arts have produced globally known

artists such as ballet dancer Anna Palova, The Nutcracker composer Pyotr Ilyich Tchaikovsky,

and world-renown musical composer, Igor Stravinsky (Embar). Although the majority of what

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was being performed was dictated and controlled by the government, this gave the people a way

to express meaning of things that they lacked freedom to do so elsewhere.

A popular visual symbol throughout Russia is Moscows Saint Basils cathedral (Embar).

Images of St. Basils and other churches are key symbols of the countrys orthodox religion.

Many churches and cathedrals in Russia make appearances on calendars, postcards or simply

framed on the walls of apartments. Icons depicting the Virgin Mary and various saints are widely

cherished and are commonly hung in a corner of the family homes (Embar).

Though during the Soviet rule religion for the most part was demolished, citizens still

held their traditional beliefs and folklore. Some believe that whistling inside of the home

beckons ill fortune and evil spirits are intrigued by bragging about good fortune or good health

(Russia).

As a main staple in the Russian diet, bread is also a key symbol for this country. Bread

symbolizes key aspects of the national self image. In the broadest of terms, bread is the symbol

for life. As many Russians face hardships and rely on bread as their primary source of nutrition,

being without implies starvation (Russia).

Living Conditions

Diet and nutrition:

The two most common foods consumed in Russia are bread and hard sausage, known as

kielbasa. These foods are used as a metric of poverty in Russia. Starvation means that your

family goes without bread, but total poverty means you go without kielbasa (Embar). People

normally eat a wide range of dairy products such as cottage cheese, slightly soured milk, and

hard cheeses. Cabbage, potatoes and mushrooms are a large portion of the Russian diet.

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Mushroom picking is actually an art for most, and identifying edible types on leisurely walks is

not uncommon for Russians (Embar).

Russians eat their three meals of the day very different then we do in the United States.

Breakfast is a quick snack of tea or coffee with bread and sausage, or cheese. Lunch is their

biggest meal of the day and ate around midday or when people get home from work. It usually

includes soup, meats such as kielbasa, cabbage and potatoes. A late super may consist of boiled

potatoes, soured cabbage and bread, or simply just bread and kielbasa. As we consider dinner our

biggest meal of the day, it is more of just a snack for the Russians (Wikipedia, Russia).

Most Russians prefer tea over coffee, but it has grown in popularity. As a marketer in

Russia, you must understand that coffee is not served as it is in America. It is served very thick

and strong; preference of the consumers. Although alcoholic beverages such as wine and beer are

popular, vodka is the most common drink for Russians. Aside from the globally known brand

Smirnoff (Smirnov), there are various vodkas that the Russians consume. The stereotype may be

true of Russia being known for vodka, however there is more to know about this aspect of their

culture. Vodka is the symbol of camaraderie and communication to the people of Russia

(Embar). Table manners and hosting rituals are obviously an important concern for any culture,

but in Russia, the most important custom during meals revolves around vodka. You must

understand that it is always drunk straight, no ice, and accompanied by a pickled or salted food,

and a toast is desired. Vodka in Russia is not considered a luxury, but more of a necessity, and is

the typical drink of choice for most. The word is derived from the Russian term for water. So as

a marketer in Russia, you better be able to handle shots; or forget about trying to adapt to the

culture.

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Housing:

One of the biggest issues Russians face is with housing. During the Soviet rule, the

majority of flats became privately owned by the state and rented out to the tenets of the country.

The housing problem in Russia has come about as these citizens make the slow shift from soviet

control to a more free state. There really is no established housing program and you typical

landlord-tenet relationship is not as you would see in the United States. The living conditions in

which the majority of the country deals with are mostly what are troublesome to Russians today.

Living together as an extended family is so common in Russia that to most it is considered a

tradition. Normally, newlywed Russian couples would live with the husbands family in a small

apartment. Most families tend to live in apartments with three generations or sometimes more

(Wikipedia, Russia). This is convenient if you have children, in which the grandmother helps

provide food and childcare. Nowadays it is important for most married couples to want to get

away from their parents and have an apartment of their own. However, because of events that

occurred during World War II, there is still a huge housing shortage that continues today. The

housing shortage and the high cost of new housing have made finding desired living conditions a

challenge. Due to the shortages of housing, new couples rarely have the opportunity to buy their

own place to live. As Russia is still working at establishing all of their systems, things are not yet

at a place to please its people. Banking credits are just too expensive for those who want to

change the tradition and live in bigger or better flats; prices are just too steep in Russia (Embar).

However, the recently elected, President Vladimir Putin has put construction of comfortable and

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affordable housing on the list of national priority. He stated that state funds should be used to

provide housing to everyone you needs it, and his people severely need it.

As a marketer this housing crisis in Russia is very crucial. Having the knowledge that the

majority of the country can barely afford housing, it is going to be beneficial in any marketing

plan. Pricing for products is obviously going to be a huge concern for those intending to do

business with Russia. As Russians struggle with the essentials for life, it is important to be aware

that their main concern is not going to be with purchasing non-essential, luxury goods. It is

always important as a marketer to be aware of the financial situation of the citizens in which you

plan to do business with.

Clothing:

In Soviet times, not drawing attention to oneself through your clothing and behavior was

highly valued. After the fall of the USSR, and the explosion of fashion in Russia, this norm has if

not vanished. However, clothes must be immaculately clean and tidy, as well as grooming is

critical. Although, do not let the up-kept appearance and demeanor of Russians fool you; it is

completely normal for brutal shoving and pushing when in crowded areas. A shirt like long-

sleeved garment that is mid-thigh long is the traditional Russian shirt for males. Russian women

wear dresses that resemble a jumper-like pinafore. Traditional Russian clothing for females was

designed to emphasize their inner dignity. Russian clothing is used to demonstrate the traditional

folk art and the spirit of the culture of Russia. In the clothing industry, it is important to

understand and anticipate the drastic climate of Russia. The winters can obviously be extreme, as

can the summers (Wikipedia, Russia). It is typical for one to associate Russian winters with

heavy scarves, fur hats, and fur parkas. Russians tend to dress as well as their salaries will allow.

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Business dress has always been known to be formal, yet conservative as in most business

settings. Men are expected to wear dark colored business suits, while women are expected to

wear subdued colored business skirt-suits that cover their knees. These business dresses are the

norm for most countries, although in Russia, your shoes are preferred to be highly polished

(Business and Russia). As a person potentially doing business in this country, it is important to

look smart and appear to be expensively dressed, as to the Russians, it enhances your credibility.

Even if you are intimidated by the Russian business people you are negotiating with, always

appear to be important and act as if you are the leading decision maker.

Recreation, sports, and other leisure activities:

The typical Russian, like any other person, enjoys watching television, reading, playing

chess and seeing movies and plays. Russia and its citizens take extreme pride in sports and

recreation. Sports are a huge part of the Russia culture, even still today, since strong

sportsmanship was inherited from the Soviet times. Russia is, and has always been, a successful

country at a number of sports that their people compete in. The most played sports in Russia are

soccer, ice hockey (no surprise there), gymnastics, and basketball. Other sports that are played,

but not as globally recognized are bandy (Russian hockey), tennis, boxing, figure skating and

skiing, and martial arts (Wikipedia, Sports). Although the majority of the citizens in Russia take

part in these sports for leisure and recreation, professional competition is taking very seriously in

this country. The Russian government is still prioritizing sports development and may even

spend more money on sports, rather than in places more essential like health care. The

government funds many opportunities to train and compete, as well as going abroad; and many

of its athletes take advantage of this. Russia takes pride in its star athletes and wants them to

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have the opportunities to compete globally and play in places like the U.S, where their salaries

are going to be greater. There is a huge emphasis on engagement in Russian sport, even if you do

not actually partake in the activity. Support of your countrys team and players is highly

encouraged.

Russia has produced many world class athletes that dominate in sports ranging from ice

hockey to figure skating. Russia is most well-known for its mens national ice hockey team,

that was established first under the rule of the soviets. The new Russian team has not been as

dominant as the prior Soviet team, but they still have won Gold in the Olympic Games, and

remain one of the top teams in the world (Wikipedia, Sports). Russia has produced many great

hockey players that have had the opportunity to play in the NHL. Three that stood out and were

nominated for MVP of the league in 2009 were Alexander Ovechkin (Capitals), Evgeni Malkin

(Penguins), and Pavel Datsyuk (Red Wings). These gentlemen are long-time heroes of Russians

and well-known across the NHL as well. Other Russian athletes that have had the opportunity to

go abroad and become greater athletes, thanks to their government push, are tennis player, Maria

Sharapova, and NBA center, Timofey Mozgov.

As an international marketer that could potentially be doing business, it is going to be

very beneficial to understand the pride Russia takes in sports and athletics. This could potentially

impact promotion activities of your product, because it would be very smart to market things at

sporting events. Because Russians show so much pride in their sports and athletes, it could

influence what products they buy or who they are influenced by. You certainly are not going to

want to promote American athletes or use them in ad campaigns.

Health care:

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Although the medical sciences are well developed in Russia, the demand for the services

is much greater than the system can administer. Many of the hospitals and clinics in Russia tend

to be understaffed or under-equipped. As the amount of diseases such as AIDS and tuberculosis

spread throughout the people of Russia, the demand for health services rapidly increases.

Ironically, one good thing about the Soviet rule was that health care was free. As Russian moves

away from this rule, things have changed and many cannot now afford the health care they once

did not have to worry about paying for. Unfortunately this large demand has lead to the decline

of public health because they just dont have the staff or space to tend to the needs of so many

people; especially those who cannot afford it. Medicines and services are not available at prices

that all people can afford because the funding for public health services has much declined. As of

2009, health expenditures were only 5.4% of Russias total GDP and there is very low

government funding for health care (Russia, CIA). Folk medicine has become a huge aspect of

Russian culture due to the inability to afford public services. Traditionally, hundreds of herbal

and alternative remedies have commonly been used to heal the sick. Thousands of people offer

their services using herbs for healing purposes. It is not uncommon for the application of leeches,

mineral baths, or spiritual healing to be used to cure illness. Many professional physicians often

prescribe this time of remedy too those whom cannot afford their help (Embar).

Russian Languages

The only official language of Russia is Russian. However, in several regions of Russia it

shares official status with Bashkortostan, Tatarstan, and Yakutia. Russian is by far the most

popular language in the country and many of the smaller bordering countries also have large

amounts of Russian speakers. Over 80% of people speaking in Russia speak Russian. Many

Russians are also bilingual, with over 100 minority languages spoken in the nation. The second

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biggest language in Russia is Tatar which is spoken by around 3% of the population. Other

spoken languages include, Ukrainian, Chuvash, Bashir, Mordvin, Circassian and Chechen.

Russia has a many dialects of Russian. The country is mainly divided up into northern, central

and southern Russia, with many other smaller dialects located across the country. The dialects

vary in their differences but they generally vary based on pronunciation, vocabulary and

grammar. Because Russia and the Russian language is very diverse, it is important for a marketer

to know what area they are dealing with and what the local language and dialect is.

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Executive Summary

Russia is a very large and diverse country, with a long and often tumultuous history.

After first major political organization was seen around the 10th century, Russia expanded as a

autocracy until the time of WWI and the Russian Civil War. From there, the country would rise

as a world power under the communist, Soviet Union. After the fall of the Soviet Union in 1991,

the Russian Federation was created. Despite some unrest, it is currently one of the top

developing countries in the world.

Russia has the distinction of being the largest country in the world. However, due to its northern

Asian location, it is largely unpopulated and has several uninhabitable regions. Russia is a very

climate and topography varies greatly depending on the location within the country. The climate

ranges anywhere from warmer, humid areas to northern tundra.

Families in Russian society are largely male dominated. Russian families are often close

and have a strong connection. Schooling is very important in Russia with nearly 100 percent of

the population being literate. However, less than a quarter of the population continues their

schooling into college. Russians take pride in their art, literature and music, while the countrys

most prevalent foods are kielbasa and bread.

The traditional religions of Russia consist of Christianity, Islam, Buddhism, and Judaism.

Throughout the Soviet era, the promoted religious belief was a scientific atheism. Today, a

large percent of the population is still non-believers. However, the Russian Orthodox Church

makes up the largest religious group in the country.

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The Russian political system in Russia is a multi-power system with an executive branch,

legislative branch and a judiciary branch. The legislative branch is broken down into two

chambers of the Federal Assembly. The country has multiple parties who hold power. Since the

fall of the Soviet Union, Russia has struggled to have a stable government and they have

experienced turmoil in since the early 1990s.

Russian is the most prevalent language in Russia. Throughout the country there are many

different dialects, which use different vocab and grammar. The dialects are found mostly divided

between northern, central, and southern Russia. Even though Russian is the main, and only

official language, there are over 100 other minority languages spoken throughout the country.

With the rich and long history of Russia, it is very important for the international marketer to

know about this nation. Due to the diversity of the country, the culture, history, and climate

everything about the country varies and is constantly changing. To not know about the Russian

past, present, and the possibilities of the future would be a major risk for anyone looking to go

into a business environment in Russia.

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Works Cited

Associated Press. "Thousands of Russians Challenge Putin's Election." CBSNews. CBS Interactive, 05Mar. 2012. Web. 08 Mar. 2012. .

"Background Note: Russia." U.S. Department of State. U.S. Department of State, 2 Nov. 2011.

"Russian Language Facts." English to French, German, Latvian, Russian & Spanish TranslationDictionary. Languages Helper. Web. 08 Mar. 2012.

.

Languages Across Europe: Russia." BBC News. BBC. Web. 08 Mar.2012..

Banks, Aurthur S., and Thomas C. Muller. "Russia."Political Handbook of the World. CQ, 2011. Print.

Curtis, Glen E. "Russia - Social Structure."Russia: A Country Study. U.S. Library of Congress, 1996. Web.

08 Mar. 2012. .

"Doing Business in Russia." - Russian Business Culture. World Business Culture. Web. 08 Mar. 2012.

.

Ember, Melvin, and Carol R. Ember. Russia. Countries and Their Cultures. New York: Macmillan

Reference USA, 2001. Print.

"Russia Has Special Tax Culture."Russia Briefing. Asia Briefing Ltd., 11 May 2011. Web. 08 Mar. 2012.

.

"Russia." CIA-World Factbook. Central Intelligence Agency, Mar. 2012. Web. 5 Mar. 2012.

https://www.cia.gov/library/publications/the-world-factbook/geos/rs.html

Associated Press. "Thousands of Russians Challenge Putin's Election." CBSNews. CBS Interactive, 05 Mar.

2012. Web. 08 Mar. 2012. .

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http://www.cbsnews.com/8301-202_162-57390615/thousands-of-russians-challenge-putins-election/http://www.cbsnews.com/8301-202_162-57390615/thousands-of-russians-challenge-putins-election/https://imail.siena.edu/owa/redir.aspx?C=eeffe465fa414257bf252359125eb583&URL=http%3A%2F%2Fwww.languagehelpers.com%2Flanguagefacts%2Frussian.htmlhttps://imail.siena.edu/owa/redir.aspx?C=eeffe465fa414257bf252359125eb583&URL=http%3A%2F%2Fwww.bbc.co.uk%2Flanguages%2Feuropean_languages%2Fcountries%2Frussia.shtmlhttps://www.cia.gov/library/publications/the-world-factbook/geos/rs.htmlhttp://www.cbsnews.com/8301-202_162-57390615/thousands-of-russians-challenge-putins-election/http://www.cbsnews.com/8301-202_162-57390615/thousands-of-russians-challenge-putins-election/https://imail.siena.edu/owa/redir.aspx?C=eeffe465fa414257bf252359125eb583&URL=http%3A%2F%2Fwww.languagehelpers.com%2Flanguagefacts%2Frussian.htmlhttps://imail.siena.edu/owa/redir.aspx?C=eeffe465fa414257bf252359125eb583&URL=http%3A%2F%2Fwww.bbc.co.uk%2Flanguages%2Feuropean_languages%2Fcountries%2Frussia.shtmlhttps://www.cia.gov/library/publications/the-world-factbook/geos/rs.html


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"Background Note: Russia." U.S. Department of State. U.S. Department of State, 2 Nov. 2011. Web. 07

Mar. 2012. .

Languages Across Europe: Russia."BBC News. BBC. Web. 08 Mar. 2012.

.

"Russian Language Facts."English to French, German, Latvian, Russian & Spanish Translation

Dictionary. Languages Helper. Web. 08 Mar. 2012.

.

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Economic Analysis

Introduction

Russia has undergone significant changes since the fall of the Soviet Union. This change

makes it more desirable to international trade/businesses. In 2009 Russia was the worlds largest

exporter of natural gas, the second largest exporter of oil, and third largest exporter of steel and

primary aluminum. Because of this reliance on commodity exports, Russia is very vulnerable to

boom and bust cycles that fallow fluctuation of prices. The government of Russia has

attempted to implement programs to reduce this dependency though technology but not much

has come about. The economy of Russia, has on average grown 7% since the late 1980s due to

the increase of Russian middle class.

Russia was one of the countrys worst hit during the economic crises of 2008-2009. In

2008 Central Bank of Russia spent one-third of its $600 billion reserves to compensate for the

crisis. By the end of 2009 Russia was beginning to move out of the economic crisis and saw

improvement. Overall, Russias economy is becoming stronger and a world power. Some of the

challenges that it faces include decrease in workforce, corruption, poor infrastructure and more.

Overall the economy of Russia is strong. It has the tenth largest economy by analysis of nominal

GDP and the 6th largest by purchasing power party. (World Fact Book).

Population

Russias population is the 8th largest in the world, and has a geographically vast market which

spans nine time zones and is 17 million square miles. Russia reached its peak in population in

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1991 with 148,689,000 before the break of the Soviet Union. Russia has been experiencing a

decline in population due to declining birthrates. The population of Russia is over 140 million

with about 73% if then living in urban areas. Those living in urban areas have most of the

purchasing power around 85%. (CEEMEA Business Group).

Total population

Population (2011) 142.8 million

Estimated growth rate of Russia -0.48%

Number of live births 1,793,828

Birthrate 10.94 briths/ 1,000

Distribution of population

Age15.2% are between 0-1471.8% are between 15-6413% are over 65

Sex 1.06 males/females

Geographic areasUrban population totals 72.8% (Moscow &Saint Petersburg are the two major cities )Rural population totals 27.2%

Migration rates 2.24 migrate/1,000

Ethnic groupsRussian: 80.8%Tatars: 3.9%Ukrianians: 1.16(other)

Sources for above section include: (FITA.org, Wikipedia.org, CEEMEA Business Group)

Economic statistics and activity

After the 2008 economic crisis, Russia is bouncing back stronger. It has the tenth largest

economy by analysis of nominal GDP and the 6th largest by purchasing power party. The U.S.

has a dependent relationship with Russia because of the large volume of export and import goods

the two countries offer each other. Russia has become the U.S.s 37th largest export market and is

the 17th largest exporter to the U.S. Russia recently joined the WTO in 2011 which will create

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even more export and investment opportunities for the U.S. Out of the BRIC, Russia has one of

the higher GDP per capita with $15,900. In 2009, the Purchasing Power Parity of Russia was

reported at 18.50. In 2009, Russias economy share of world total GDP was 3.05 percent. Russia

is the fastest growing market in Europe. Below is a chart illustrating this upward trend through

GDP. (U.S. Commerce Service)

A. Gross national products:

1. Total: (2010) $1.477 trillion

2. Rate of growth: (real GDP 2011) 4%

B. Personal income per capita: $15,900

C. Average family income( based on the Lorenz curve): 39.9

D. Distribution of wealth

IT is estimated that by 2015 82%of households in Russia will be part of the middle class.The chart below shows this trend.

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Souces for above section include (CEEMEA Business Group, FITA.org)

E. Minerals and resources

Oil is one of the largest exports of Russia. It has one of the largest natural gas reserves

and the second largest coal reserves in the world. In 2009 it surpassed Saudi Arabia in

being the largest producer of crude oil in 2009. Russia is one of the largest producers and

consumers of electric power. (U.S. Energy Information Administration)

Petroleum (Thousand Barrels per

Day) 2008 2009

30 Year History Russia Eurasia World Rank Russia

Total Oil

Production

9,794.12 12,550 85,566 2 9,933.71

Crude Oil

Production

9,356.78 11,929 73,733 1 9,495.36

Consumption 2,856.00 4,215 85,436 5 2,927.00

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Petroleum (Thousand Barrels per

Day) 2008 2009

Net

Export/Imports(

-)

6,938.12 8,335 -- 217 7,006.71

Total Oil

Exports to U.S.

465 605 12,915 9 563

Refinery

Capacity

5,428 8,205 85,460 3 5,428

ProvedReservesMbr

/>(Billion

Barrels)

60.00 99 1,330 8 60

Sources (http://205.254.135.7/countries/country-data.cfm?fips=RS)_)

F. Surface transportations

Russia is the largest country when it comes to land mass and area; totaling 17,098,242 sq km.There are many different transportation methods found in Russia some are listed below:(cia.gov)

- Airports: 1,213

- Heliports: 50

- Pipelines: Condensare 122 km; gas 160,952 km

- Railways: 87,157 km

- Roadways: 982,000 km

- Waterways: 102,000 km

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- Merchant marine: 1,097

- Ports terminals: Kaliningrad, Kavka, Nakhodka, Primosk, Saint Petersburg,

Vostochnyy

l

G. Communicationsystems

With how large Russia is, effective communication is key. Telephone and internet are the

main forms in which people communicate. (FITA.org, cia.gov)

Telephone:

- To Make a Call From Russia, Dial 810

To Make a Call to Russia, Dial +7

- Telephone lines: 31.1 per 100 inhabitants

Internet: (suffix ru)

- Computers: 13.3 per 100 inhabitants

- Internet users: 21.1 per 100 inhabitants

- 10.382 million internet hosts; which is ranked 13 th in the world

H. Working conditions: statistics on employment and income:

After the economic crisis of 2008 employment hit its heights at around 10.2 percent.

Russia has gotten out of this crisis and unemployment is down to 6.6 percent. (World

bank.Org)

- Total employment (millions): 71.1

- Employment growth, percent, year on year: -0.1

- Real disposable income growth, percent year on year: 1.5

- Real wage growth, percent, year on year: 5.1

- Average monthly wage: 703.2

- Unemployment (percent): 6.6

I. Principle industries

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Business sector % of GDP

Agriculture 3.8

Fishing 0.2

Mining, Oil and Gas extraction 10.4

Industry 16.4

Electricity, Water and Gas transmission 4.3

Construction 5.7

Trade, Reparation of Objects of Private Use 18.1

Hotels and Restaurants 1.0

Transport communications

Finance 9.7

Real Estate 4.5

State Administration, Military and SocialSecurity

11.4

Education 3.1Health and Social Security 3.7

Other Housing, Social Services 1.6

Gross Value Added at Basic Price 100

Gross Domestic Product at market price 100.0

Source: Rosstat, www.gks.ru

J. Foreign investment

The population of Russia is over 140 million with a growing middle class. This makes it

one of the most promising markets for investment and business ventures. U.S. investment

in Russia is approximately $21.3 billion; making the U.S. Russias 10th largest investor.

Many market opportunities exist; many of which are listed below:

Opportunities:

- Apparel

- Automotive parts& Services Equipment/Accessories

- Aviation

- Construction/Greenbuild

- Consumer Electronics

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- Cosmetic/ Toiletries

- Electric Power Generation & Transmission Equipment

- Medical Equipment

- Refinery Equipment

- Safety & Security Equipment

- Travel & Tourism to the U.S.

Trades

In January of 2012, Russia hit its highest export level at 51 billion USD. Since October

2012, Russias exports have increased slightly every month from 43.9 billion USD. Prior to

2011, exports didnt even reach the 40 billion USD area, ranging from 27 to 35 billion in 2010.

There was a big increase in January 2011 to 42.31 billion USD, but was followed by a sharp

decrease the next month at 30.3 billion USD. Since that sudden decrease, the trend for exports

out of Russia has been gradually increasing. About 80% of Russias exports consist of metal and

energy, which includes, oil, natural gas, metals, and timber. Russia is one of the worlds top

producers of oil and one of the biggest exporters of natural gas. Netherlands, Germany, and Italy

are a few of the countrys main export partners (Trading Economics).

Within two years Russias imports have increased from 11.372 billion USD in January

2010 to 30.5 billion USD in January 2012. Like the exports, imports in February 2011 sharply

declined, but has gradually increased since to reach 30.5 billion USD. Some of the main imports

into Russia are vehicles, machinery, iron, steel, meat, aircraft, fruits, and consumer goods.

Due to Russias exports exceeding its imports, the country reported a trade surplus of

20.5 billion USD in January 2012. Since 1994 Russia has indicated a trade surplus every year.

The surplus has increased since then, hitting a high point in 2007 before a steep decrease around

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the recessions of 2008 and 2011, which are reflective of the imports and exports during that time.

The trade surplus has been increasing since the low points in 2008 and 2011 with its highest

surplus occurring in January of this year. Another thing to note is that within the last year,

export growth has been slightly higher than import growth, a pattern that could indicate Russia

maintaining a positive balance of payments if the trend continues (Trading Economics).

The currency for Russia is Russian Rubles (RUB). As of March 6, 2012, 1 USD was

equivalent to 29.368 RUB. Therefore, 1 RUB is equivalent to 0.03405 USD, which makes the

Ruble undervalued compared to the USD. For the past year, the Ruble has depreciated against

the US dollar by 5.12%, and recently appreciated 1.35 percent against the US dollar within the

last month. As of now, the Ruble seems to be hovering around the same rate (Exchange-Rates).

Trade Restrictions

Trade restriction is a main issue in Russia. The country has only been admitted into the

World Trade Organization in December 2011, becoming the last major economy to be admitted

into the organization. Therefore, there is been many years of trade barriers and restrictions that

were used as protectionism and revenue generation. Due to Russias desire to enter the WTO,

the Russian government had to change some of their restrictions to adhere to codes and

regulations. Now that the country is officially part of the WTO, more changes are bound to be

implemented.

According to the WTO, tariffs should be lower or heading lower in the near future. The

countrys overall import tax ceiling is being reduced to 7.8% from an average of 10% for

products in 2011. The tariff ceiling on agriculture products should drop from 13.2% to 10.8%,

while manufactured goods should decrease from 9.5% to 7.3%. In the next three years, the WTO

forecasts that approximately 25% future tariff cuts will be implemented (Rapoza).

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A major issue for the U.S. in relation to trade with Russia is the Jackson-Vanik

Amendment that was created during the Cold War restricting U.S. trade with the Soviet Union in

1974. Obama and the current U.S. administration are pushing to cancel the amendment because

it limits the U.S.s ability to trade with Russia (Downing). Its particularly important to abolish

the amendment now with Russia as a member of the WTO because the amendment goes against

rules and regulations of the WTO.

Back in 2002 the Bush administration attempted to eliminate the amendment, but pulled

back when Russia banned U.S. poultry imports (Downing). This and many other trade barriers

have hindered trade for Russia with other countries. Some of the major trade barriers are

intellectual property rights protection, costly and burdensome customers procedures, investment

policy, and sanitary and phytosanitary standards.

Regarding intellectual property rights, theres internet piracy and mass reproduction of

pirate discs. Many trademarks and patents have been either counterfeited or infringed. The main

problem is that theres no enforcement to protect intellectual property rights, especially for

foreign companies. Custom procedures for products entering Russia are lengthy and costly,

delaying the delivery of many products. Also, the uncertainty of changing procedures at any

moment causes much strife.

Russias investment policy hinders international trade by trying to protect the domestic

industries. Investment measure related to trade include licensing requirements, local content

laws, manufacturing requirements, export performance requirements, domestic sales

requirements, and employee restrictions. Theres also export duties on raw materials and

sanitary standards requirements (European Commission).

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In January of 2012, Russia approved import meat quotas with a total quota and specific

quotas for the European Union and U.S. The EU and U.S. were given quotas of 60 tons each for

the year. The volume of tariff rate quotas is one of the issues that is subject to change with

Russias accession into the WTO (Merco Pres.). In result of the accession to the WTO, the

Russian government will cut import duties on new cars to 25% from the existing 30%. Both

poultry and meat and cars are some of the products that the Russian government have put high

tariffs or quotas on in the past. Due to the accession into the WTO, the country obliged to reduce

the restrictions and barriers (Subbotin).

In more current news, Russia sent arms shipments to a port that will be en route to Syria.

The EU had an arms embargo imposed on Syria, but the problem is that there is no international

law that can enforce the embargo (Belanger).

Other Economic Activity

Other economic activity that Russia is involved in is countertrade. A popular story

regarding countertrade with Russia is American company Pepsicos involvement with the

country while it was still the former Soviet Union. At the time, the country didnt allow

American consumer brands to be sold and Pepsicos CEO at the time wanted to make Pepsi the

first Western consumer product made and sold in the Soviet Union. After many years of

negotiations, Pepsi was sold under a landmark syrup-for-barter agreement. Pepsico delivered

syrup that was paid for with Stolichnaya Vodka, in which the syrup was used to make Pepsi in

Russia. Pepsico was given the marketing rights of all Stolichnaya Vodka in the U.S. in

exchange. This agreement was a vital one to establish relations between Russia and the U.S.

(Pepsico).

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Following the fall of the Soviet Union, Russia received much needed aid from countries

such as the U.S., Germany, United Kingdom, and France. Since 1992, the U.S. has aided

approximately $2.6 billion to Russias development. This aid includes health, civil law, local

governance, and conflict mitigation (USAID). On the other side, Russias foreign aid to other

countries, including the U.S., has gradually increased.

Labor Force

Below is a table that displays how much of the population is economically active.6.1. ECONOMICALLY ACTIVE POPULATION 1)

1992 1995 2000 2005 2006 2007 2008 2009 2010

Thousand persons

Economically active

population- total

75060

70740

72770

73432

74167

75159

75757

75658

75448

of which:

employed in theeconomy

71171

64055

65070

68169

68855

70571

70965

69285

69803

unemployed 3889 6684 7700 5263 5312 4589 4792 6373 5645

Men 39197

37338

37631

37274

37808

38103

38680

38527

38578

of which:


37161

33726

33574

34710

34996

35650

36139

35059

35500

unemployed 2036 3613 4057 2725 2812 2453 2542 3468 3078

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Women 35863

33401

35139

36158

36660

37056

36876

37131

36870

of which:


34010

30330

31496

33620

34160

34920

34626

34226

34303

unemployed 1853 3072 3643 2538 2500 2136 2250 2905 2567

As percentage of total

Economically active

population- total

100 100 100 100 100 100 100 100 100

of which:


94.8 90.5 89.4 92.8 92.8 93.9 93.7 91.6 92.5

unemployed 5.2 9.5 10.6 7.2 7.2 6.1 6.3 8.4 7.5

Men 100 100 100 100 100 100 100 100 100

of which:


94.8 90.3 89.2 93.2 92.6 93.6 93.4 91 92

unemployed 5.2 9.7 10.7 6.8 7.4 6.4 6.6 9 8

Women 100 100 100 100 100 100 100 100 100

of which:

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94.8 90.8 89.6 93 93.2 94.2 93.9 92.2 93

unemployed 5.2 9.2 10.4 7 6.8 5.8 6.1 7.8 7

In the table below, numbers are given regarding number of unemployed in Russia.

6.8. NUMBER OF UNEMPLOYED

1992 1995 2000 2005 2006 2007 2008 2009 2010

According to the results of the

Sample survey on employment 1)

Total number ofunemployed,

thou. persons

3888.6

6684.3

7700 5263 5312 4589 4792 6373 5645

Out of them:

students, pupils,pensioners

thou. persons 717.5 520.3 699 476 464 421 554 667 588

percentage 18.5 7.8 9.1 9.1 8.7 9.2 11.6 10.5 10.4

women

thou. persons 1852.9

3071.7

3643 2538 2500 2136 2250 2905 2567

percentage 47.6 46.0 47.3 48.2 47.1 46.5 47.0 45.6 45.5

rural residents

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thou. persons 639.2 1396.2

1897 1874 2084 1913 1813 2154 2042

percentage 16.4 20.9 26.8 37.6 42.0 41.1 37.5 32.4 36.2

In accordance with the data of the

Federal Employment Service

(end of year)

Number of unemployedregistered at stateestablish-ments of

employment service2)

,thou. persons

577.7 2327.0

1037.0

1830.1

1742.0

1553.0

1521.8

2147.3

1589.9

Out of them:

women

thou. persons 417.0 1454.7

714.8 1199.5

1132.5

982.7 918.2 1179.5

891.3

percentage 72.2 62.5 68.9 65.5 65.0 63.3 60.3 54.9 56.1

rural residents

thou. persons 101.7 671.7 325.3 891.2 890.0 825.2 764.5 845.6 699.4

percentage 17.6 28.9 31.4 48.7 51.1 53.1 50.2 39.4 44.0

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Ratio of number ofunemployed registeredat state establish-mentsof employment serviceto total number of

unem-ployed,percentage

14.9 34.7 14.8 35.1 34.8 36.7 28.8 34.8 28.2

This table displays the number of people that are employed and in the workforce in Russia.

6.2. AVERAGE ANNUAL NUMBER OF EMPLOYED IN THE ECONOMY

BY OWNERSHIP TYPES1)

199

2

1995 2000 2005 2006 2007 2008 2009 2010

Thousand persons

Total in the economy 71905

66330

64517

66792

67174

68019

68474

67343

67567

including by type ofownership:

state, municipal 49660

27945

24371

22499

22038

21796

21530

21097

20891

private 13887

22750

29776

36178

37223

38327

39110

38894

39459

ownership of public andreligious

organizations

(associations)

583 474 526 382 383 375 358 329 316

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mixed Russian 7580

14736

8114 5202 4855 4591 4274 3841 3716

foreign, joint Russian andforeign

195 425 1730 2531 2675 2930 3202 3182 3185

As percentage of total

Total in the economy 100 100 100 100 100 100 100 100 100

including by type ofownership:

state, municipal 69.1 42.2 37.8 33.7 32.8 32.1 31.5 31.3 30.9

private 19.3 34.3 46.1 54.1 55.4 56.3 57.1 57.8 58.4

ownership of public andreligious

organizations

(associations)

0.8 0.7 0.8 0.6 0.6 0.6 0.5 0.5 0.5

mixed Russian 10.5 22.2 12.6 7.8 7.2 6.7 6.2 5.7 5.5

foreign, joint Russian andforeign

0.3 0.6 2.7 3.8 4.0 4.3 4.7 4.7 4.7

(All tables are provided by the Russian Federation Federal State Statistics Service)

Of the total labor force, theres more men than women. Men represent more than half of the

labor force at about 35,500,00 while women stand at 34,303,000. Particularly in managerial and

specialists positions, theres a lot more men than women in those types of positions (Russian

Federation).

Inflation Rates

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In 2008, inflation rates in Russia skyrocketed due to the economic and financial crises

globally. From a high of about 15%, the inflation rate decreased to about 6% in the middle of

2010. Following that, inflation rates increased to almost 10% in 2011 before declining to 3.7%

as of February 2012. The trend for inflation rates seems to continue to decline, but as seen in the

past couple years, the rate can increase and decrease in an instant (Trading Economics).

Developments in Science and Technology

As of 2010, Russia has 238 million cell phone users and 44.959 million main line phone

users. (CIA WorldFactbook) The Internet is still growing in Russia but has a large impact onmarketing.

From 2010-2012 Russia made the following technological advances: (Timeline of Russian

Inventions and Technology Records.)

Chatroulette (2010)- first randomized webcam chat room

Nuclear Power Station barge (2011)- first mass-produced portable nuclear power

station

Nord Stream (2011)- the longest offshore pipeline Russky Island Bridge (2012)- the longest cable-stayed bridge

Russia has strong engineering and scientific talent. There are about 3,500 engineers for

every 1 million people, almost the same as the US. More people work in research and

development in Russia than in any other country in the world. (American Chamber of Commerce

in Russia) According to the CIA World Fact Book, there is a 99.4% literacy rate of adults 15

years and above (2002). Females have a 99.2% literacy rate while males have 99.7%. Russia

spends 3.9% of GDP on education and expenditures (2006).

Channels of Distribution

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Russia has nine time zones and an underdeveloped infrastructure makes it hard to access

markets outside of major cities. In Western markets, companies and firms are used to well-

defined distribution channels. Since Russia isnt well off in the marketing/advertising area, clear

channels of distribution are hard to find. There are four options in Russia when choosing a

distribution channel: agents, distributors, representative/branch offices, and foreign subsidiaries.

(Doing Business in Russia)

The first option is using an agent. You shouldnt rely only on agents, but they have great

knowledge on which regions are best for your product. Its suggested to visit Russia a few times,

and build a personal relationship with an agent. They will get your products out there, handle

customs, transportation, and all other operations. (Doing Business in Russia)

The most common marketing strategy would be to select a distributor. There are national,

regional, and local distribution alternatives. Apparel, cosmetics, packaged foods, alcoholic

beverages, consumer electronics, and household appliances have a decent amount of distributor

options. Their job would be to sell and deliver your product to retailers or end-users. They will

also take care of customs clearance, warehousing, inventory management and other logistics.


Running advertising campaigns exclusively through distributors can produce

disappointing results. They usually deal with multiple suppliers and arent completely dedicated

to advertising a certain product without a great deal of advertising support from the supplier.

Russian law also limits certain types of promotional activities. (Doing Business in Russia)

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http://www.merlion.ru/eng/press-center/press/press-666/

The third option would use distributors and establish their own representative offices.

Opening an office gives the company more control over promotion and distribution aspects and

provides direct contact with end-users. Due to Russian Civil Code, these offices cant be directly

involved in commercial activity, so their main job is to oversee distributors and/or agents. (Doing

Business in Russia)

Branch offices on the other hand can engage in commercial activities because they are

accredited for five years and have no choice but to be registered with tax authorities and state

organizations. Either a branch or representative office can be beneficial because there are fewer

taxes and youre directly in the environment. (Doing Business in Russia)

The fourth option would be to register a foreign subsidiary, especially if youre in the

cosmetics, pharmaceutical, appliances, durable, and industrial product sectors. This gives the

supplier full control of distribution and allows them to directly sell to their own companies

registered in Russia. It will also reduce false invoicing that distributors often create. (Doing

Business in Russia)

For the most part distribution channels are still a work in progress in Russia but over the

past few years Moscow and St. Petersburg have developed well-organized distribution channels.

Large-scale retail stores have been created in Moscow and are now able to buy in bulk and

negotiate long-term commitments. Large shopping malls and big box stores are showing up in

Russian cities. The development of these distribution channels has made selling products easier.

Most distribution takes place through informal channels and open markets. Also companies may

encounter erratic distribution, unpredictable and tough competition, and word-of-mouth

marketing. (Doing Business in Russia)

Online shopping has increased dramatically over the past five years. 69.1 million people

have personal computers. They have a variety of payment methods, SMS, credit card, payment

aggregators, web-money, and cash payments. There are 20,000 online stores and in 2010 they

sold $4 billion worth of goods. Electronics and household goods were 50% of those sales and

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have become the fastest growing markets. Many of the online stores dont allow the use of credit

cards and debit cards at checkout. The process for customers would be to place an order for

delivery and pay when they get the item. (Doing Business in Russia)

The chart describes: Retail Sales in Russia increased 6.8 percent in January of 2012 over

the previous year. From 2006 until 2011, Russia's average Retail Sales was 8.50 percent reaching

an historical high of 17.70 percent in December of 2007 and a record low of -9.80 percent in

September of 2009. This page includes a chart with historical data for Russia's Retail Sales.

http://www.tradingeconomics.com/russia/retail-sales-annual

Retail trade is up 3.4% in 2010 due to major companies such as Azbuka Vkuza,

Perekriostok, Pyatorochka, Sedmoy Kontinent (Russia), IKEA (Sweden), Metro (Germany) and

Auchan (France). (4)

Credit is the preferred operation of sales for both retailers and wholesalers. Its suggested

to use lines of credit or other secure financing vehicles and to avoid sales on open account.


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Media

Television, radio, print, and billboard media are used the most in Russia. Due to the

economic crisis of 2008, companies cut their advertising budgets. In 2010 when the market

started to recover, companies are actively increasing their budgets.

Television

Television is the most popular media in Russia. 74% of the population watches national

television and 59% if the population watches regional channels. There are three main channels

that reach over 90% of Russia. (First Channel, Rossiya, and NTV)

News and Entertainment Channels

First Channel: national, state-owned

Rossiya: national, state-owned

NTV: national, commercial channel

TV Center: owned by Moscow city government

Culture, Sports, and Entertainment Channels

Russia K: state owned, culture and arts

Russia 2: commercial, sports

STS: commercial, entertainment

Ren Tv: Moscow based commercial station with strong regional network

Russia Today: state-funded, international English language news

Radio

There are three main nationwide radio stations in Russia. Radio Russia (covers 96.9% of the

population), Radio Mayak (92.4%), and Radio Yunost (51%). While the majority broadcast

music, some have news and analysis. (Russia)

Radio Russia- national network

Radio Mayak- state-run national network

Radio Yunost- youth station

Echo of Moscow- news and analysis

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Russkoye Radio- major private network

Voice of Russia- state-run external service, broadcasts in English and other languages

(Russia)

Print Media

There is a large variety of print media throughout Russia. There are over 400 daily

newspapers that cover every field. Newspapers are the second most popular media source in

Russia. There are a total of 8,978 newspapers, which have a circulation of 8.2 billion copies.

Russia has 102,300 newspaper journalists, which is the largest number of journalists throughout

the world. Local newspapers are more popular than national ones. 40% of Russians often read

local newspapers and 27% actually consult them regularly. The most popular newspaper is

Argumenty I Fakty, which has 2.9 million readers. Weekly Life follows it with 1.9 million

readers, TV Guide with 1.2 million readers, and Perm Region Izvestiya with 1 million. The most

important business newspapers are Vedomosti and Kommersant. Only about half of newspapers

are newsworthy, while the other half are tabloids. The most popular tabloid is Zhizn. There are

6,698 magazines and periodicals with a circulation of 1.6 billion copies. (Russia)

Internet

As of 2009, there are 40.853 million internet users. The internet country code is .ru andthere are 10.382 million Internet hosts (2010). E-commerce reached the $9 billion mark in sales.

In 2010 the Internet advertising market reached $400 million with Yandex Direct, Google

Adwords, and Rambler Begun as key buyers. Internet advertising continues to grow. (Media of

Russia)

Russia has three main service providers: Relcom, Demos, and Russia On-Line. Relcom

has grown more than 10 times since 1996.

According to the European Journalism Center, there were 1,510 cinemas as of 2007.

During the week, cinemas show 9 national and 37 foreign movies. National movies have a

market share of 21%. (8)

There are three main news agencies: Itar-Tass (state-owned), RIA Novosti (state-owned),

and Interfax (private). Itar-Tass is the major news agency. RIA Novosti publishes news and

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analysis of social-political, economic, scientific, and financial subjects on the Internet. Interfax

concentrates on news concerning Europe and Asia. (Media of Russia)

Executive Summary

Russian Federation, formally the Soviet Union is one of the fastest growing economies of

the world today. With a population of approximately 142 million and vast amounts of land it is

an international business persons ideal market. Russia bounced back from an economic crisis in

2008 with staggering growth. Russia has the 10th largest economy because of their high nominal

GDP; and is the 6th largest Purchasing Power Parity. Russia has become the U.S.s 37th largest

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export market and is the 17th largest exporter to the U.S. Russia and has joined the WTO in

2011, which will create even more export and investment opportunities for the U.S. Out of the

BRIC Russia has one of the higher GDP per capita with $15,900. In 2009, the Purchasing Power

Parity of Russia is reported at 18.50. In 2009, Russias economy share of world total GDP was

3.05 percent.

Exports are essential for the Russian economy; particularly oil, metals, and natural gas.

These commodities are 80% of the countrys exports. Major imports include food, fruit,

machinery, technology, vehicles, aircraft, steel, and consumer goods. Exports have exceeded

imports for many years in a row, reflecting a positive trade surplus for the country.

Since the early 1990s, one of the countrys primary goals has been to be admitted to the

World Trade Organization. After many years the country finally received admission to the WTO

in December 2012. During the Cold War, Russia (Soviet Union)s economy was controlled by

the central government. Some of the effects are still evident in todays government and systems.

Following the fall of the Soviet Union and desire to be part of the WTO, Russia has had pressure

to change many of its ways. In order for the country to grow economically, Russia needed to

reach outside its borders, but seemed too reluctant to do so. Theres a long list of trade

restrictions that Russia used to protect their domestic industries and generate revenue. Gradually,

foreign investments have increased encouraging the economys growth. Trade barriers are being

reduced and eliminated to abide by the WTOs codes and regulations, making it easier for free

trade with countries.

In the marketing and advertising world, Russia is underdeveloped. Channels of

distribution are hard to reach outside of large cities. Choices to reach end-users are through

agents, distributors, representative/branch offices, or a foreign subsidiary. Online shopping has

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increased recently because 69.1 million people have personal computers. You can choose to

advertise through television, radio, print, billboard, or internet media sources.

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Documents

Russia Cultural and Economic Analysis