Business culture in Russia: history, politics, and international commerce

Global Business Culture Analysis of Russia

Global Business Cultural Analysis of Russia

What are the major elements and dimensions of culture in this region?

Over the last several years, conducting business in Russia has been very challenging. Part of the reason for this, is because the country has been undergoing tremendous changes since the downfall of the Soviet Union. What is happening is the political and economic reforms that were implemented during the 1990's, created a small aristocracy of wealthy individuals. These people controlled large corporations that dominated various sectors of the economy such as: oil, gas, electricity and telecommunications. During this time, the disparities between this wealthy aristocracy would become more apparent, as the economy remained stagnant and the country was experiencing a financial crisis. This would lead to the appointment of Vladimir Putin as the Prime Minister in 1999. His objective was to stabilize the economy and help Russia be able to begin to experience above average growth. Once he became the President in 2000, he would begin to alter the changes that were implemented during the 1990's. As his government would begin to clamp down on various civil liberties and would go after some of the largest corporations controlled by the aristocracy. A good example of this can be seen by looking no further than Mikhail Khodorkovsky of Yukos. This was one of Russia's largest oil companies that would be driven into bankruptcy, after the trial and sentencing of its founder (Mikhail Khodorkovsky). What happened was the Russian government claimed that Khodorkovsky and Yukos were intentionally evading income taxes. At which point, Khodorkovsky was charged and found guilty of these offenses. Once this occurred, the Russian government would seize the assets of the company, as part of an effort to collect the back taxes owed by Yukos and Khodorkovsky. This is significant because, it shows how the Russian government has changed the way they work with various private business interests. Where, a mixture of state owned companies are competing alongside private organizations. For many foreigners, conducting business in Russia can be challenging, because of the changing political and economic situation. Then, when you combine this with the various cultural and historical challenges, this highlights how conducting business in the country can be a different experience. (Tertov, 2005, pp. xxix -- xxxix) To fully understand how businesses can successfully adapt to these challenges requires examining: the culture of the region, how this has been integrated into the business community, the way this compares with conducting business in the United States and the effects that this will have on U.S. businesses. Together, these different elements will highlight the overall benefits and potential drawbacks of doing business in Russia.

1.1: Russian History

To fully understand the business culture of region requires looking at the history of Russia itself. This is because the country has deep seated traditions that are directly tied to various events. When you can understand how these events have impacted Russian society, this will allow for a greater understanding of their culture.

In the case of Russia, they are at a crossroads between the West and the East. This meant that historically, Russia would be slow to embrace the different ideas of the West (such as democracy), while being hesitant about endorsing the culture of the East. Over the course of time, this would isolate Russia from the rest of the world. As this would signify the underlying relationship that Russia would have with other countries; where, it would go from periods of engagement to deep isolation. Once the country began to grow, various rulers would have territorial aspirations that were similar to what was being enjoyed by the European powers. This would cause the country to go through a rapid period of expansion, as it was attempting to become a modern industrialized nation. Yet, they still continued to embrace the ideas of the past. Where, many of the different cities were seeing rapid improvements, while the country side was embracing old ways (such as feudalism on a certain level). This would cause vast disparities to occur in the economy, as the country wanted to be a modern economic power, but the divisions in modernization would limit the positive effects of any kind of improvement. After the First World War, these differences became so extreme, that this would lead to a Communist Revolution. This would signify a shift that would occur in the basic economic model. Where, the two different economic systems of urban and country life would be consolidated down to the state planned economy. This and the frequent invasions that Russia would face throughout its history would create the culture of suspicion within the country. As there was more caution in making drastic changes, that could have a negative impact upon the nation. After downfall of the Soviet Union, the years of isolation led to mistrust of outsiders that would create vast difference between Russia and many Western countries. As the people will embrace: the history, traditions, culture and what it teaches them; in determining how they conduct a variety of business transactions. (Ziegler, 2009, pp. 1 -- 9)

1.2.2: High context vs. Low context

In Russia, the people will use various non-verbal signs to underscore the overall amounts of emotions they are feeling about a particular situation. During the course of conducting business, this could be a useful signal in helping effectively read the different emotions. Where, if the transaction being conducted was successful, it would normally involve both parties engaging in hugs, fierce handshakes and patting each other on the back. If the transaction was not a success, most people will be unemotional. This is different from Western culture, where most executives are expected to say what they are feeling and mean what they say. (Mitchell, 2009, pp. 80 -- 82)

1.3: Languages

Russians have been known to be very long winded, with the average time to complete various thoughts taking about 10 to 15% longer in comparison with other languages. Part of the reason for this, is because the country's agricultural past has encouraged people to begin using words more creatively when speaking. There are also some words that are used, which do not translate into English such as privacy. This is because the cultural traditions of Russia do not understand such concepts, which makes translating certain ideas more challenging. (Richmond, 2009, pp. 109 -- 117)

1.3.1: Russian

Russian is a Slavic language that has close ties to all of the different European languages including: English and German. This means that many of the root words are similar to what is used in the common languages spoken throughout the West. However, as far as the alphabet is concerned, the language will utilize what is known as the Cyrillic alphabet. This is different from Western languages, as each of 32 different symbols will represent particular roots of certain words. When reading the language and learning Russian, the basic alphabet will help foreign business executives to navigate their way around. With the alphabet is pronounced the way that it is spoken; helping visitors to be able to learn basic Russian quickly. This is because it based off the roots for each word, which makes it easier for Westerners to understand the language, if they have a basic comprehension of the alphabet. (Richmond, 2009, pp. 109 -- 117)

1.3.2: Other trade languages

In the Russia there are a total of 150 ethnic languages that are spoken. However, when conducting any kind of business transaction the major European languages are commonly spoken. With English being the most universal, as executives and managers can understand / read it better than they speak it. As a result, any kind of foreign business entity that plans on conducting business on a regular basis must keep this in mind. (Richmond, 2009, pp. 109 -- 117)

1.4: Religion

The official religion of Russia is: Russian Orthodox. This has been the country's main religion since 1997. However, other religions are also recognized in the Russian Constitution to include: Islam, Buddhism, Judaism and other forms of Christianity. In general, Russians consider themselves to be more spiritual than Westerners. Yet, under Communism the practicing of various religions would be outlawed. (Horton, 2006, pp. 77 -- 83)

1.4.1: Russian Orthodox

The Russian Orthodox Church has been undergoing a cultural Renaissance, as it is able to operate freely, following decades of secrecy. This is because the church has often been the center point for Russian historical traditions. Where, it would help to provide a basic foundation of uniting the different classes of peasant and nobles. In general, the Orthodox Church is different from traditional Western churches as there are: no seats, no music (instead chanting occurs) and there is focus on the different icons of the religion. The icons are similar to a religious hierarchy, with God and Jesus serving at the top positions. Then, further down is the apostles and other important figures such as: John the Baptist and the Virgin Mary. At which point, there are various Eastern Orthodox arch angels and saints. (Horton, 2006, pp. 77 -- 83)

1.4.2: Muslim

Islam is the second most popular religion in Russia, with it encompassing about 14 to 20 million people. The most notable population groups that embrace this religion are: the Tartars, Bashkir and the in the Caucus region. The majority of the people who practice Islam are considered to be Suni Muslims, while select portions of the country will have pockets of the Shia sect. (Horton, 2006, pp. 77 -- 83)

1.4.3: Others

The other religions that are practiced include: Buddhism, Judaism and other branches of Christianity. In general, these different religions are practiced by small population groups, which have been largely assimilated into Russia society. (Horton, 2006, pp. 77 -- 83)

1.5: Ethics

In Russia, many people lack a sense of personal responsibility. This is because the Soviet system punished individuals who thought creatively and exercised any personal initiative. Where, many individuals would often defer the issue to higher authorities, to make any kind of decisions. After the downfall of the Soviet Union, this would remain a part of the culture within the government and business. At the same time, corruption and favoritism has often been known to occur. Where different officials will seek added personal benefits, based upon the positions they are holding. Together, these two elements highlight how conducting business in Russia can be vastly different from the West. (Richmond, 2009, pp. 61 -- 68)

1.5.1: Within the government

Inside the government, many officials are often in their positions based upon who they know or political connections. This means that many bureaucrats are often incompetent and corrupt. Then, when you combine this with the new found wealth of the Russian elite, means that the overall amounts of corruption have become even worse. As various business interests will continue to pay bribes and kickbacks to government officials, for different permits and other government services. At the same time, the high levels of corruption from the Soviet system, has meant that the lack of ethics within government officials would continue to increase. (Richmond, 2009, pp. 61 -- 68)

1.5.2: Russian Mafia

In Russia, the term Mafia is used to describe illegal and legal enterprises that were developed in the aftermath of the downfall of the Soviet Union. Where, various former communist officials would seek to engage in a variety of activities including: extortion, prostitution and drugs. At the same time, the organizations would also be able to gain influence within many private businesses. Where, the mafia was utilizing a similar system of exercising control as the Soviet government, through criminality and violence. This would establish a new kind of alliance between government officials, former government officials and private businesses. (Richmond, 2009, pp. 61 -- 68)

1.5.3: Transitional period and what society deems

In general, society will often view the underlying amounts of corruption as a part of business as usual. With this becoming so common that many citizens have common name for what is taking place, kleptocracy. For many Western businesses, this means that there will be a period of having to pay bribes to government official, as part of making progress. This is because corruption has become so engrained in Russian society that it has become a part of business as usual. (Richmond, 2009, pp. 61 -- 68)

1.6: Values and attitudes

For generations Russians have embraced the idea of working only out of survival. This is because any kind of individual achievement was largely discouraged. Instead, people would focus on their personal relationship with friends, family and associates. (Ayios, 2004, pp. 156 -- 180)

1.6.1: Transition into Capitalism and Democracy

The transition to capitalism and democracy has meant that many businesses are facing challenges in motivating employees. Where, everyone is concerned about holding onto their jobs, yet will not go the extra mile for the customer. This can be seen in all aspects of a Russian business, from the way many people will rudely answer the telephone to being slow to respond to demands from customers. (Ayios, 2004, pp. 156 -- 180)

1.6.2: Change in Russian culture

The last twenty years of greater economic freedoms have meant that many younger Russians are beginning to embrace the idea of individual achievement. Where, they are willing to go the extra mile for the customer, to increase their overall chances of improving economic opportunity. Despite these changing attitudes, many people are complaining that they are working harder and making less money. (Ayios, 2004, pp. 156 -- 180)

1.6.3: Gender role in Russian culture

In Russian society women are often treated as second class citizens, in comparison to their male counter parts. Where, there may be certain areas that women outnumber men such as: physicians. Yet, when you look beyond this statistic, it is clear women are expected to work 40 hours a week in a factory / office and then have to maintain a family. (Mitchell, 1998, pp. 38 -- 40)

1.6.4: Social Status

The social structure in Russia is based upon wealth, political connections and power. With most wealthy industrialists and politicians indirectly interconnected in one way or another. This is different from the days of the Soviet Union, when party affiliation would determine the social status of an individual in society. (Tertov, 2005, xxxiv)

1.7: Customs

Russia has a cultural tradition of being deeply religious, with many of different services known for their mystical traditions. Since the downfall of the Soviet Union, New Year's Day has become an important holiday. Where, this has become similar to Christmas, with various gifts being exchanged. Another important custom is the use of the Shapka. This is a furry hat that is worn to protect against the harsh winters that the country is known for. (Mitchell, 1998, pp. 74 -- 78)

1.8: Social structures and organizations

The social structures in Russia are largely independent, supporting a variety of different interests ranging from unions to women's organizations. This is different from the days of the Soviet Union when many of the different organizations were an extension of the government. (Sperling, 1999, pp. 83 -- 91)

1.9: Education

1.9.1: Mandatory education

In Russia education is mandatory for everyone, with various basic and secondary school programs being offered for free. The term of study, for the equivalent of a high school education is ten years. (Jones, 2001)

1.9.2: Importance of College and Graduate education

In general, individuals that have undergraduate and post graduate degrees have the opportunity to study abroad. At the same time, they also have the opportunity to work with the government and private business. (Jones, 2001)

1.9.3: Cultural education opportunities

In Russia the ability to understand and elaborate on different issues of philosophy and literature are part of the culture of inward reflection that exists. The education system presents ordinary citizens the opportunity to have an understanding of this aspect of culture. (Jones, 2001)

2.0: How are these elements and dimensions integrated by locals conducting business in the nation?

2.1: Communication

2.1.1: High and Low context

Throughout Russia the various high and low context provisions are applied equally. As the different kinds of high and low context levels of communication, are following centuries of tradition.

2.1.2 Language

Depending upon where you are located, the overall use of language could be different. With many of Eastern and Southern parts of the country; speaking more of the native dialects.

2.2: Religion

2.2.1: Religion within the workplace

In general, religion in the workplace is largely discouraged, as most Russians will tend to embrace the work ethics from the Soviet Union. Where, religion would never play a role in work environment.

2.2.2: Significance of religion/theology in government/corporate operations

When it comes to the government and private business, religion will play mainly a ceremonial role. Beyond this overall scope it largely not an issue in government and private entities.

2.2.3: Religion as a factor in everyday life

Russians are more spiritual, as they will often participate in various religious services. During the Sunday and on many religious holidays it is not unusual to see churches filled to capacity.

2.3: Ethics

2.3.1: Ethics and corruption within the Government

Corruption is rampant within the government, as the majority of officials will use their positions in office, as a way to obtain additional personal benefits. In many case, a bribe or kickback will often be paid by legitimate businesses, to receive various permits or favorable treatment from the government.

2.3.2: Corporate ethics

The overall amount of corporate ethics is often an extension of the underlying ethics in government. As private business are often ran by former government officials, who have connections within the government.

2.3.3: Corruption within local business and the populace

The overall levels of corruption have trickled down to local businesses, with many criminal enterprises often engaging in extortion and loan sharking. At the same time, many police and government officials will seek bribes, in an effort to look the other way or as part of their own extortion scheme.

2.4: Values and Attitudes

2.4.1: Central driving attitude in business

The central attitude in business is one of complacency. This is because many people would do just enough to get by in the Soviet system. As a result, this attitude of indifference has become increasingly common.

2.4.2: Social status effects on domestic and international business

The social status of an individual, associated with a business will determine what kind of favorable treatment they receive from the government. Where, this will decide what kinds of contracts will be awarded on a local level. For international businesses this means that they must be able to understand how the social status can affect, their ability to receive various government services and incentives.

2.4.3: Role of gender within domestic business

The role of gender will follow a similar pattern that is occurring nationally. Where, women will often be viewed as inferior to men in the workplace.

2.5: Education

In general, the education levels in Russia are high, with a literacy rate of 99.4%. Out of this number 47.7% have completed the equivalent of high school, while 16.0% have an undergraduate degree or higher. (Andresen, 2007)

3.0: How do both of the above items compare with U.S. culture and business?

3.1: Communication

3.1.1: High and Low context

In U.S. culture, there is more direct contact, with other party speaking what issues are on their mind. The overall use of body language and other signs will be less distinct. (Andresen, 2007, pp. 22 -- 50)

3.1.2: Language

The basic language that is spoken in the U.S. is English, with some variations of Spanish. At the same time, Americans will often use various words to describe their overall feelings. This is different from Russia, where emotions are only expressed in a rather non-direct way. (Andresen, 2007, pp. 22 -- 50)

3.2: Religion

3.2.1: Religion within the workplace

In America, religion in the work place is often considered to be a private matter and is practiced by the individual, with it being discouraged in the work environment. (Andresen, 2007, pp. 22 -- 50)

3.2.2: Significance of religion/theology in government/corporate operations

In the U.S., religion is considered to be a separate issue and various symbols or other religious items are discouraged in this environment. (Andresen, 2007, pp. 22 -- 50)

3.2.3: Religion as a factor in everyday life

For most Americans, religion is a part of some individuals' lives, while it is not as big of an aspect as others. This is different from Russia, where most people are deeply religious. (Andresen, 2007, pp. 22 -- 50)

3.3: Ethics

3.3.1: Ethics and corruption within the Government

The levels of corruption with the U.S. government are much lower than in Russia. This is because there are greater amounts of transparency and there is less sense of entitlement among bureaucrats. (Andresen, 2007, pp. 61-74)

3.3.2: Corporate ethics

US corporations have higher ethical standard, as various laws and regulations will punish executives who engage in unethical behavior. (Andresen, 2007, pp. 61-74)

3.3.3: Corruption within local business and the populace

The overall levels of corruption among local business and individual are less, as there is no culture of corruption that has existed for many decades. (Andresen, 2007, pp. 61-74)

3.4: Values and Attitudes

3.4.1: Central driving attitude in business

The central driving attitude in business is being able find a better way to deliver different products and services than competitors. (Andresen, 2007, pp. 61-74)

3.4.2: Social status effects on domestic and international business

The social status of an individual will not play, as important of a role on a local or international level. This is because most businesses are only interested in someone effectively achieving their objectives. (Andresen, 2007, pp. 61-74)

3.4.3: Role of gender within domestic business

Women will play an important role in local businesses, as they are viewed as being equal to men in many different circles. (Andresen, 2007, pp. 61-74)

3.5: Education

In America free education is provide for the basic and secondary levels of schooling.

4.0: What are the implications for U.S. businesses that wish to conduct business in the region?

4.1: Politics

4.1.1: Overcoming decades of distrust

To build trust, it is advisable that all business people build relationships with the Russians one step at a time. Where, series of informal face-to-face meetings would occur over a period of six months. This will help to establish a more personal relationship.

4.1.2: Corruption within the government

The levels of corruption within the government of Russia are so severe, that all business will have to pay various forms of bribes / kickbacks to government officials, to receive access to services they need to receive.

4.1.3: Laws regarding foreign trade

Russia is trying to enter the World Trade Organization. This can have impact upon trade by assessing different duties and tariffs on a variety of items.

4.2: Ethics

4.2.1: Sense of Fair Trade and corporate responsibility

In Russia the sense of fair trade and corporate responsibility does not exist. This means that many of the different patent protections and other regulations that an American business enjoys would not apply to Russia.

4.2.2: Rules of conduct within corporate Russia

When conducting business within corporate Russia, it is imperative that everyone shows respect for the culture and history of the country. During meetings, it is important to avoid jokes (as they translate poorly) and do not engage in pointing or swearing. As the business culture in Russia is generally more conservative.

4.3: Maintaining a Multi-National Corporation within Russia

4.3.1 Benefits and opportunities

The different benefits of being a multinational corporation in Russia, is that you would be able to participate in the above average growth that the country is experiencing. While at the same time, being able to carve out a unique market share in the country's new developing middle class. This will allow those corporations that are seeking to increase their exposure, the opportunity to establish operations in developing markets early. Over the course of time, this could help contribute to the improving profit margins by diversifying the focus of the business.

4.3.2: Costs and risks

There are a variety of risks associated with conducting business in Russia: the most notable would include: nationalization of various industries, changes in government policies / regulations and sharp changes in the economic cycle. These are important, because they highlight how the underlying costs of doing business in Russia could be substantial. As these risks, could potentially cost a business market share and the investment that they have made in the country / region.