Cross Cultural Management – Doing

Business in Russia

For: Patrick Murphy

By:
Abhishek Gupta
Gaurav Yadav
(0964105)
 Table of Contents

1.

Table of Contents...................................................................................................2

Introduction........................................................................................................... 3

Russia.................................................................................................................... 4

Some of the key concepts of Russian culture are ..............................................4

Doing Business in Russia.......................................................................................5

The Business Structures in Russia.........................................................................6

Style of Management in Russia..............................................................................6

Tips for Russian Business Culture.......................................................................7

Russian Business etiquette – Do’s and Don’ts (Communicaid.com, 2010):........8

Doing Negotiations in Russia.................................................................................9

References........................................................................................................... 11
 Introduction
The business world now is becoming more and more related to each other internationally, and this can
be attributed to the improvements in transportation, communication, access to cheaper markets where
cost of production is lower. Business and people travelling to newer and far more places, it has
become important for organizations to learn about cultures and how to manage it.

“Cross-cultural management is the study of the behaviour of people in organizations located in

cultures and nations around the world. It focuses on the description of organizational behaviour within
countries and cultures, on the comparison of organizational behaviour across countries and cultures,
and, perhaps most importantly, on the interaction of peoples from different countries working within
the same organization or within the same work environment” (Adler, 1983).

Cross national commercial relationship is gaining enormous importance in today business world and
so the study of Cross Cultural Management has become a key initiative for business school graduates.
Culture as defined by Linton :” "A culture is a configuration of learned behaviours and
results of behaviour whose component parts are shared and transmitted by
members of a particular society" (Graham, 1985).

Multinational businesses help us to build a new contact with different nations. The important thing is
to understand is how a company operates in all these different cultures. Most multinational businesses
which has a set up abroad face a common problem in regards to culture, which is cultural diversity
among people. Nowadays to avoid this setback manager are trying to realize the core of the culture
and preparing themselves better to do business overseas.
 Russia
The Russian republic is the largest of the 21 of the 21 republics that make up the Commonwealth of
Independent States. It is spread over most of Eastern Europe and North Asia. Its main ethnic groups
are Russians, Tartars and Ukrainians. Russia’s main religions are Russian orthodox, Islam and
Roman Catholicism.

The Russian culture is specifically associated with the ethnic Russians as they are the majority in the
country. It has a rich history and can boast a long tradition of excellence in the following areas:

• Literature and Philosophy

• Classical Music
• Ballet
• Architecture
• Painting
• Cinema and
• Technology

Some of the key concepts of Russian culture are

• Collectivism – Russians always project a strong communal image which is even reflected in
the business practices even today. As the climate there is severe, people have learnt to
cooperate and collaborate than to compete, which has been vital for their survival. This sense
of togetherness is what separates them from the westerners. Russian collectivism dates back
to the peasant farmers, who lived in agricultural villages known as 'mirs' or 'obschina' and
worked together in an organised and self-managed community. (Communicaid.com, 2010)
• Egalitarianism - This is something unique about the Russian culture, what it means is
distribution of benefits equally amongst its entire people. In the business world in Russia this
equates to strategies of equality, reciprocity and mutual advantage. Russians are very
conscious about their status and believe in having equal standing as compared to others. The
deal will only be done when both the parties benefit equally (Communicaid.com, 2010).
• Dusha – “The enigmatic Russian 'dusha' or 'soul' is the central to everyday Russian
behaviour and as a result of this when building successful business relationships with
Russians you will find that mutual liking and emotion will from a strong basis for the
deal to happen” (Communicaid.com, 2010).
Doing Business in Russia

Russia is undergoing a radical period of change. Its old order swept away around two decades
back and the new order is still trying to establish itself. Russia as a country is changing on a day
to day basis (WorldBusinessCulture.com, 2010). In such a huge disparate country, what might be
true in one religion might be untrue in an another.

According to Ageev, Gratchev and Hisrich there are four basic business philosophies which
motivate entrepreuners and other groups of buisness people in a particular society (Hisrich, Bucar,
& Oztark, 2003):

• Bureaucratic Entrepreneurship – based on active initiatives but under state run

supervision (Hisrich, Bucar, & Oztark, 2003)
• Pragmatic entrepreneurship – based on maximum profitability on a technocratic basis
(Hisrich, Bucar, & Oztark, 2003)
• Predatory entrepreneurship – based on the search for success through suppression of
rivals including ‘underground’ or ‘mafia’ connections, and growth by any means
including cheating on partners, consumers and the state (Hisrich, Bucar, & Oztark, 2003)
• Socially responsible entrepreneurship – based on linking business with national
interests, the resolution of social problems, and universal human values and beliefs
(Hisrich, Bucar, & Oztark, 2003).

According to Ageev, Gratchev and Hisrich, Russia is characterised by the combination of predatory
and beurocratic entrepreunership.

In Russia for centuries the state has been seen as a organ of oppression and repression, laws and
statutes are therefore seen as a enemy and they need to be avoided at all costs
(WoldBusinessCulture.com, 2010). The only things in Russia that can be relied upon are close
personal relationships within the business environment. Networking and key alliances are important
do doing successful business in the country. Also the legal status of many Russian companies is very
dubious as their incorporation is under old laws of Soviet era. The government is formulating new
laws but due to the corruption and wrong practices it is next to impossible to implement them.
The Business Structures in Russia

In Russian business organizations autocracy and centralized decision making are manifested in them.
Russian companies usually are guided by one centralized figure that will make all the strategic
decisions, with little or no consultation with the others. So it becomes important for businesses who
want to enter into a partnership with their Russian partners, need to get in touch with the top boss and
not the middle managers as they have no authority to take any decision.

Style of Management in Russia

As mentioned above the style is much decentralised and directive. The top boss gives the direct
instructions and others follow. No or little consultation is expected from someone who is lower in the
hierarchy. On the flip side if you consult to much with your superiors it is taken as a negative on the
manager, and is considered weak and lacks decisiveness (WoldBusinessCulture.com, 2010).

Middle managers have no inputs in deciding the strategy of the company and only the most powerful
middle managers will have a little say in the decision making process. Russian delegations will only
follow orders given to them by their superior and will not deviate from it. That is why many a times
decisions take longer to come as the decision is not put in front of the right person and the delay
happens.

When a manager from a foreign country has to lead a team in Russia, he will have show signs to
being authoritative based on his technical skills or professional knowledge. The manager should show
commitment and build relationships. Let them know its “ok” to make mistakes and you can learn
from them.

The Russians are very proud and knowledgeable about their culture so when someone wants to do
business with them and if they show knowledge of Russian culture and language, they will be able to
crack a deal much faster as compared to someone who shows no knowledge. Never expect to close a
deal in the first meeting itself, they just consider it as a formality and take it as getting to know each
other. Russians do not believe in signing contracts and honour trust and relationships more than the
dotted line contract.
Tips for Russian Business Culture

• Law-breaking and rule avoidance have been promoted to an art-form in a country where the
state has, for centuries, been seen as the enemy.
• the only thing that can be relied upon in a business context is the strength of the relationships
upon which the business is based. Do not underestimate the importance of relationship
building - or the time taken in the process.
• Don't waste time trying to get decisions out of middle and junior managers - go straight to the
top if possible.
• Companies tend to take a short-term view of any given business opportunity. In a country as
volatile and uncertain as Russia, who knows what lies around the corner?
• Managers are expected to manage and this means giving precise and detailed instructions to
subordinates. Inclusive, 'caring' management styles might be viewed as weak.
• Meetings tend to be used to disseminate information or to give direct instruction
• People have a tendency to believe what they have heard over what they have read - so say it
as well as putting it in writing.
• Body language is minimal in meetings (unless being overly theatrical during an impasse in a
negotiation situation) which can lead to mistaken impressions of disinterest
• Women play little part in business at the senior levels and on the whole Russian businessmen
are more comfortable dealing with other men.
• It is important to dress smartly and to try to look important. If you do not appear to be a
decision-maker people will quickly lose interest.
• Lot of business decisions are taken over meals and drinks in Russia. So always extend
hospitality to the Russians and otherwise never refuse a invitation from them/
• As a foreigner, you are expected to be on time to all business appointments. However, your
Russian counterpart may be late, as this may be a test of your patience. Do not expect an
apology from a late Russian, and do not demonstrate any kind of attitude if your business
appointments begin one or two hours late. This may also be a test of your patience.
• Social events are more relaxed. It is acceptable for foreigners to be 15 to 30 minutes late.
• Patience is an extremely important virtue among Russians; punctuality is not.
• Russians are known as great "sitters" during negotiations, this demonstrates their tremendous
patience
• Some 'hard-line' Russians still view compromise as a sign of weakness, and often refuse to
back down. To these individuals, compromising is bad business.
 • As a foreigner, you should realize that "Final Offers" are often not actually the end of the
negotiations, and that often times the outcome will be more beneficial and attractive if you
can hold out.
• here is a Russian term meaning "connections" or "influences. It is extremely difficult to do
business in Russia without help from a local. To help with this, gifts, money or other items
are often a good idea when doing business in Russia.

Russian Business etiquette – Do’s and Don’ts (Communicaid.com,

2010):

• Do shake hands firmly when greeting and leaving your Russian partners and make direct eye
contact, but never shake hand at the door as it is unconsidered bad luck.
• Do partake in small talk, which normally involves talk of family and personal matters, before
dealing with business.
• Do take a gift that symbolizes the stature of your company and the importance of the
impending business deal, preferably an item characteristic of your local area or one that
displays the company logo. This is important as it helps you build relationship with the person
you are meeting.
• Don’t be afraid to show some emotion, the Russians won't! In a Russian meeting tempers to
flair and people walk out of the meeting, it is a common occurance.
• Don’t as the Russian proverb says 'hurry to reply', but 'hurry to listen'.
• Do not praise or reward anyone in public as it may be viewed with suspicion or cause envy
and jealousy. Remember the collective rules over the individual.
Doing Negotiations in Russia
In Russia, the primary approach to negotiate is to use contingency bargaining. The buyers always hold
the supreme position in deal and they try to push the agreement on the seller. The main focus of the
negotiator is to get maximum benefit from the business deal. Most of the Russians view negotiations
as a zero- sum game in which one sides gain is equal to the other sides loss. Negotiation becomes
personal sometimes as the parties are known to each other. During negotiation between the two
parties one comes to resolution through logical arguing, presenting a lot of supporting information, or
making a different though not necessarily a better proposal. At no point of time they can
underestimate the negotiating power of the Russians. According to Russians if they share information
among the group then it creates a bargaining advantage for the other party. (Katz, 2008)

Pace of Negotiation- The negotiation often goes very slow and is delayed. The deal starts of slowly in
the initial bargaining stages and it depends on how your counterpart can get the deal to move faster..
Patience is required to get success in this country. Russians generally used polychromic work style.
While monochromic work style which is practised in Germany, U.K. and U.S.A. find this style very
confusing, irritating and annoying. It is important to keep track on the bargaining development at all
time. If the counterpart is slowing down the negotiation process it means they are trying to find other
alternatives or they are not interested in doing business with you (Katz, 2008).

Bargaining – While many Russians are good negotiators only few have good experience in
negotiating. It is very difficult to expect a concession from them. According to Russians concession
is a form of weakness and they refuse to change their position and are firm on their decision. They
only change their minds when, situations that the other parties has offered includes sufficient
concession or have shown some exceptional firmness in bargaining. The best way to approach them is
to remain tough throughout the bargaining process but in a polite manner. Concession are not
advisable to come on the early stages of bargaining as the party will expect further compromise as the
bargaining continues (Katz, 2008).

Deceptive technique is use by the Russian negotiators to disinterest the whole deal. The approach they
used over here such as telling lies, sending non verbal fake message, misrepresenting the item value
or making a false demand or concession. Lies may be easy to see through during the business deal but
it can verified by some other channel of information. Russian middle managers have little authority to
agree and the decision has to go through the top manager for approval.

Russians often use pressure technique as an approach to their business deal. It is difficult to oppose
the time pressure when working against a deadline, The westerns can use it to their advantage if the
deal or the contract signing in the west.(Katz, 2008).
Russians get very personal while negotiating and try to distract you from the points they do not want
to discuss. It is a common practice in Russia to give gifts and entertains businessmen to get their deal
go through. Bribing is also a mean to make the deal happen.

Though the negotiation and contracts are more based on relationships and happen over vodka and
dinners, what they can do differently is not only seal the deal with the words but also sign a contract
to make it official and more acceptable to the western business world. This would result in less un-
pleasantries between the two business and would result in a better partnership. This is because for the
western business world it is important to have contracts in place, signed and sealed for the deal to go
through while for Russians its more to do with trust and relationships. Once the Russians businessmen
trust and have built a relationship with the western businessmen, they should honour the contract by
signing as it is a part of the western business world culture which the Russians need to understand.
Russians when dealing with westerns need to understand bribing is a illegal but to show their
gratitude can offer a small gift or offer hospitality as means to thank the people for the deal/
 References
Adler, N. J. (1983). Cross-Cultural Management Research: The Ostrich and the
Trend. Academy of Management , 8 (2), 226-232.

Communicaid.com. (2010). Russian Business Cultures. Retrieved July 8, 2010,

from communicaid.com: http://www.communicaid.com/cross-cultural-
training/culture-for-business-and-management/doing-business-in/Russian-
business-and-social-culture.php

Graham, J. L. (1985). The Influence of Culture on the Process of Business

Negotiations: An Exploratory Study. Journal of International Business Studies , 16
(1), 81-96.

Hisrich, R. D., Bucar, B., & Oztark, S. (2003). A Cross-Cultural Comparison of

Business Ethics: Cases of Russia, Slovenia,Turkey, and United States. Cross
Cultural Management , 10 (1), 4-7.

Katz, L. (2008). Negotiating International Business. www.negintbiz.com.

WoldBusinessCulture.com. (2010). Background To Business in Russia . Retrieved

July 9, 2010, from WoldBusinessCulture.com:
http://www.worldbusinessculture.com/Russian-Business-Style.html