6 CONCLUSIONS AND DISCUSSION
6.1 A NSWERS TO RESEARCH QUESTIONS
This section aims to answer all the three research questions that were presented in the introduction of this research.
1. Research question: What implications exist to support the internationalization to Russian markets at the moment?
The objective of the first research question was to present a clear image of the current business environment in Russia with its special implications. The overall business environment in Russia was described already in the introduction, but further analysis was conducted through interviews with interviewees having experience from and currently operating at Russian markets. The finding of the research was that even though the ongoing crisis has affected the Russian business environment in a negative way, the market potential especially for outsourcing services is huge and constantly growing. Especially the devaluation of the ruble has affected
the market entry decisions of Western firms, which in turn affects the amount of potential customers of companies providing outsourced accounting services in Russia. Besides, due to the current market situation, the companies that are already operating at the Russian market are looking for options to reduce their operating costs. All these factors together support the internationalization, since through differentiation over competitors and by settling to lower margins at first a stable market position could be gained.
Other supporting factors for the internationalization to Russian markets are also the short physical distance to huge market area, growth potential and also availability of educated workforce. The current situation in Russia has decreased the overall price level from the Western perspective, which makes the market entry attractive at the moment. Additionally, overall status factor could be seen as one remarkable driver to internationalize to Russian markets. Building reliability and trust among customers by operating at the market also during the difficult times would most likely strengthen the position at the market in the future as well.
2. Research question: How companies make their decisions concerning accounting in Russia and what are the main trends at the moment?
The driver for the second research question was earlier recognized behavior of companies to internalize their outsourcing functions when operating in Russia. The aim of the research question was to gain more knowledge about the behavior of companies operating in Russia and about their willingness to outsource their accounting. As a result, three basic reasons for this particular behavior were identified: remarkably high prices of Western service providers, willingness to strict control over financial management and organic growth and development of the companies. The findings during research imply that many companies perceive the price levels of professional accounting service providers very high. These companies have outsourced their accounting functions from the beginning of their operations in Russia because the same service provider has provided them overall support when establishing the business in Russia. However, due to the changing market situations the possibility to hire and train an own accountant had turned out to be in many cases the cost-efficient option that had led to internalizing the accounting functions of the company. The unstable market can be seen as a creating factor for the second reason of particular customer behavior. Operating in the market
environment such as Russia, forces companies to have a strict control over their financial management, which have led to internal accounting operations.
It should be noted that the cost-effect implies especially to Western companies operating at the Russian market, whereas for small and medium-sized Russian companies the organic growth can be seen as one influential factor for outsourcing and internalizing decisions. It was identified that in the cases of growth of a company, the service provider sometimes could not grow along, which had led to internalizing the accounting functions. Besides, during the research a certain group of companies was identified. These companies, either Western or Russian, had had their own internal accountants from the beginning of their operating history, which of course had grown a strong experience in the company. Convincing these kinds of companies about outsourcing their accounting would require significant commitments.
3. Research question: How a Finnish accounting firm should perform its market entry to Russian markets?
The third and the main research question of this researched aimed to creating a model for most effective and suitable market entry to Russian markets for Finnish accounting firm. This market entry model was presented in chapter 5.3. The result of this research was that the firm should perform its market entry and internationalization process through small incremental steps based on its levels of commitment. The phase of these steps is much affected by internal factors of the company such as other ongoing projects, other attractive markets and current capabilities.
The model presented for the market entry consists of two stages; first, the company should establish a Partner Network through recruiting Partner that operates at the Russian market and provides the services. Second, after gaining more market knowledge and re-evaluating the capabilities for further commitment to the market, an acquisition of an existing company at the market is used as a method for establishing actual own operations at the market. Choosing an acquisition as a method is explained with the importance of continuity of the business and quick access to the market. Especially in the country of relationships, acquiring an existing company with existing customer base enables profitable operations from the beginning. Further on
committing the important individuals for the business helps to maintain the quality and improve the business.
The process of internationalizing and entering the market in small incremental steps enables the comprehensive preparation for each steps as well as building the relationships at the Russian market. For attracting new customers, the grounds should be built already at the stage of establishing the Partner Network. Positive and active presence during the challenging period in Russia creates trust and credibility among the potential customers, and finally at the stage of operating own business, the work for building the relationships and marketing the business is already done. The overall process for the internationalization and market entry is presented in figure 13. The framework for the process of evaluating the market entry could be repeated still again, and by re-evaluating the goals for the business in a long run the growth of the operations can be prepared by new commitments to the market.
Figure 13. Simplified summary of the internationalization process.