Findings of this Master‟s thesis hold implications for, and raise intriguing questions about the ways in which European SMEs will manage internationalization to Russia in the future. The results suggest that SMEs need to be aware that the internationalization process is a dynamic process that includes a lot of learning. Hence, when planning to enter Russian market, SMEs should conduct market research and build networks though developing contacts with business partners that are considered one of the most important assets when doing business in Russia. Market research will help to:
understand if target market is “ready” for the service SME is offering and prices it is setting,
whether target market has favorable conditions for internalization and how the industry is structured,
make sure that there is no blockers (e.g. legal) that can prevent the internalization,
uncover specifics of the industry and to allocate SME‟s limited resources correctly,
determine the most suitable entry mode and penetration strategy, etc.
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The market research can be done by (1) professional (consultant), (2) SME itself, (3) project worker (e.g. student). This decision should be made based on company‟s available resources, intentions towards the market, desirable outcome.
In correspondence with Coviello and Munro (1997) this Master‟s thesis finds networks to be one of the most important enablers for the internationalization of Finnish service SMEs to Russian market, as four case companies had prior market relationships (one firm found a partner with an existing network base to initiate the internalization process to Russia).
Therefore, managers should focus on systematically increasing the amount of external contacts as, according to the results of this study, it brings faster and more efficient learning about market and culture, opens up opportunities and may help with dealing with challenges the market possesses.
Finding and reaching potential customers in Russia were pointed out to be a very difficult process due to the fact that Russia has a top-down decision making culture where decisions need to be coordinated with upper-level managers and directors. Moreover, it can be extremely difficult to reach out to top management as contact information of decision makers is not in open access; their assistants are meant to be the first contact who “filter” incoming offers. To make first contact to potential customers as well as doing sales in the market, Finnish service SMEs should aim high and always try to get in contact with decision makers; contacting the company though general number or email are unlikely to bring results. It was suggested to go to exhibition only as part of a market research, but not for finding potential customers – usually decision makers are not present there and companies are focused to sell their own products/services. Most of the interviewees advised to approach special Finnish organizations that can facilitate the process of getting right contacts (e.g. Finnish-Russian Chamber of Commerce or Finnpro). When contacting potential Russian companies, especially distantly, language proficiency is crucial (Russian decision makers, especially in a big traditional corporations are unlikely to speak English), so if the firm does not have a person who is able to communicate in Russian, it is advised to find one. Preparing materials about the company and its services in Russian for the meeting as well as translating the website into Russian language will be very beneficial.
After first contact is made successfully, foreign firms often get confused that dealing with Russian people is very different than in their home country.
When dealing with Russian partners/clients, it is important to remember that Russians have more careful approach in business than in many other countries, including Finland. Russian people would rather do business with people they know and trust. It happens often than strangers can get cheated, so, managers should be suspicious and careful especially in the beginning of relationship building and check all the papers and agreements; oral agreements might be mistreated. To win over Russians, to reach informal connection and make them trust you, it was suggested by the interviewees to:
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Prepare and show references (especially from projects Russia),
Send more than one person, including one with “higher” position, to the meeting,
Invite Russians to Finnish facilities, show how the company is operating and talk to main people of the firm,
Be ready to receive detailed questions and answer them straight away,
Be ready to adjust the service to the target market.
It is important to remember that it takes time for Finnish companies to build trust with Russian people and start doing mutually beneficial business with them. As soon as you have reached good relationships, the business side will proceed as well. However, interviewees pointed out that decision making process is at least twice longer than in Finland and Finnish firms should save some patience.
As official and legal matters in Russia can be quite heavy, it is recommended to get legal and accounting services, especially if there is a plan to open a subsidiary. However, if Finnish SME plans to do business in Russia through exports and project works, having a trustworthy person who will check administrative queries can be beneficial, unless there are partners that can help with these matters. Using a translator can be doubtful, as they may not know about specifics of the business, so misunderstandings and misinterpretations may take place.
When choosing subsidiary as an entry mode, Finnish managers should keep in mind that the understanding of “control” by Russian and Finns is different. Local personnel have to be checked and controlled frequently (in person and by modern communication channels) especially in the beginning due to the following reasons as Russians see the lack of control as lack of care, so they might lose the interest to do the best for the company as well as Russian managers may be overuse their authority and power.
Partnerships were announced to be one of the most suitable entry modes for service SMEs as getting an experienced partner who will share company‟s interests may solve many challenges starting from cultural and language differences to localizing both, service and business activities, from dealing with red tape to opening up opportunities in the market through their existing knowledge and connections. As networks were pointed out to be one of the main enablers for internalization and doing business in Russia, right partnership can help SME to achieve results in this market faster and more effectively. However, finding a suitable partner who will share the same interests, have same level of commitment and not have mercenary interests usually becomes a challenge. Therefore, if Finnish SME decides to partner up with a local player, the responsibilities of both parties have to be agreed and clearly defined before doing business together. Another advice for not getting into trap of dependency on a partner is to find several partners and chose the best performing one.
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Companies selling services, not products often face a bigger need for localization of the offerings and business processes than product firms when entering Russian market.
Due to the rapidly changing economic situation inside and around Russia, triggered by the crisis five years ago, Finnish SMEs should make sure that there are no “dead-end” barriers (impossible conditions to enter the market by foreign entities e.g. due to the certain laws and regulations, or monopoly in the industry) that are currently being reinforced as Russia aims to achieve
“import substitution”. In case Finnish SME decides to enter the market, it is recommended to be patient as the payoff of such a market penetration will most probably be a long-term investment. However, the interviewees of this study have positive expectations about how the market will change in the near future and they see growth and advancements (e.g. in digitalization) in many industries and procedures and they believe that this difficult conditions will not remain forever and nowadays it is very important to be in the market to be ready when the market booms.